Answer:
Some basic rules need to be followed when using them –
1. Use Visual Aids only if they Add Value – Make sure that you have a reason to use a visual, rather than using it for its own sake. If your ideas are better explained through words, avoid the visual, since this will only distract the attention of the audience.

2. Match your Visuals with the Level of the Audience – Your visual aids should be made more or less sophisticated, depending on your audience. For example, if you are making a presentation to top management, the graphics should be extremely polished. For less formal presentations, simple graphics created on your own computer or laptop should be sufficient.

3. Make the Visuals Clear and Large enough – Avoid creating visuals that are so small that that they have to be described. It is better to use no visual support, than to use visuals that cannot be seen.

4. Make the Visuals Simple – When creating visuals, avoid making them too intricate and detailed, so that the audience can understand them without difficulty.

5. Avoid Too Much Text with Visuals – Visuals should have short captions, using only key words and simple typefaces, so that attention is drawn to the visual alone. For the sake of easy identification, make sure that each visual is given an appropriate caption and is numbered.

mboo38
Q.1 Explain controlling and also discuss different types of control [10]
Ans. Controlling: It involves monitoring the employees’ behavior and organizational processes and take necessary actions to improve them, if needed. Control is the process through which standards for performance of people and processes are set, communicated and applied. Effective control systems use mechanisms to monitor activities and take corrective action, if necessary.
There are four steps in the control process. They are as follows:-
Step 1. Establish Performance Standards. Standards are created when objectives are set during the planning process. A standard is any guideline established as the basis for measurement. It is a precise, explicit statement of expected results from a product, service, machine, individual, or organizational unit. It is usually expressed numerically and is set for quality, quantity, and time. Tolerance is permissible deviation from the standard.
Step 2. Measure Actual Performance. Supervisors collect data to measure actual performance to determine variation from standard. Written data might include time cards, production tallies, inspection reports, and sales tickets. Personal observation, statistical reports, oral reports and written reports can be used to measure performance. Management by walking around, or observation of employees working, provides unfiltered information, extensive coverage, and the ability to read between the lines. While providing insight, this method might be misinterpreted by employees as mistrust. Oral reports allow for fast and extensive feedback. Computers give supervisors direct access to real time, unaltered data, and information. On line systems enable supervisors to identify problems as they occur. Database programs allow supervisors to query, spend less time gathering
facts, and be less dependent on other people.
Step 3. Compare Measured Performance Against Established Standards. Comparing results with standards determines variation. Some variation can be expected in all activities and the range of variation the acceptable variance has to be established. Management by exception lets operations continue as long as they fall within the prescribed control limits. Deviations or differences that exceed this range would alert the supervisor to a problem.
Step 4. Take Corrective Action. The supervisor must find the cause of deviation from standard. Then, he or she takes action to remove or minimize the cause. If the source of variation in work performance is from a deficit in activity, then a supervisor can take immediate corrective action and get performance back on track.
Types of Control
Controls are most effective when they are applied at key places. Supervisors can implement controls before the process begins (feed forward), during the process (concurrent), or after it ceases (feedback).
Feed forward controls focus on operations before they begin. Their goal is to prevent anticipated problems. An example of feed forward control is scheduled maintenance on automobiles and machinery.
Concurrent controls apply to processes as they are happening. Concurrent controls enacted while work is being performed include any type of steering or guiding mechanism such as direct supervision, automated systems (such as computers programmed to inform the user when they have issued the wrong command), and organizational quality programs.
Feedback controls focus on the results of operations. They guide future planning, inputs, and process designs. Examples of feedback controls include timely (weekly, monthly, quarterly, annual) reports so that almost instantaneous adjustments can be made.
The following diagram represents an integrated model connecting all the abovementioned functions of management.
Q.2 Veer Prabhakar is the Vice President of web bazaar, online portal for shopping of various products. He has team of 100 people at different levels and departments. He is facing certain challenges.
Challenge 1 – To maintain motivation levels of sales associated who are doing good sales
Challenge 2 – How to deal with the supply chain associates who are not following up properly for order delivery. (Currently, they are getting Cell Phone allowance for consistence follow-up after office hours)
Challenge 3 – To deal with the people who keep taking leaves without prior information.
Suggest suitable methods to shape employee behavior.
Ans. Veer Prabhakar the Vice President of web bazaar, online portal should use sales contests, a popular tool used by business owners to encourage sales activities. Under these programs, sales personnel who meet certain sales goals are rewarded with cash bonuses, paid vacations, etc. But business experts contend that sales contests can have unintended consequences for organizations if they are poorly defined or structured so that only a small segment of the sales force is rewarded. Indeed, some organizations provide incentives only to a certain percentage of top-level performers. Such programs—whether commissions or sales contests—are usually implemented in hopes of creating a competitive environment, but all too often they have the opposite effect. “Sure, your top salespeople are thrilled about the program—for them, it most likely means another trip to Hawaii or Europe,” wrote Melanie Berger in Sales and Marketing Management. “But for the vast majority of your sales force, the incentive is yet another opportunity to do one thing: lose. And nobody feels good about losing. All too often, executives planning incentive programs for their sales forces assume they need to motivate and reward their top performers—the ones who already generate the bulk of their business. Less successful—shall we say, average—players are ignored, left to remain, well, average.”
In addition, increased emphasis on customer satisfaction and increasing market share with current customers is likely to broaden the responsibilities of salespeople, who will in turn expect to be compensated appropriately. “Today’s selling environment is frustrating and fascinating,” said Marchetti. “Technology is propelling us into a new way of thinking about business strategy and the way we define success. As always, though, salespeople will do what they’re rewarded for doing. That’s why compensation plans have to keep up with the changing selling methods. Mr. Veer Prabhakar must motivate their reps to build real relationships between customers and company, in order to increase the share of each customer’s business and to increase the value of each customer to the company.”
All the three challenge can be solved by analysis of individual level according to view of OB. Organizational Behavior emphasizes on intellectual capital as represented by the sum total of knowledge, expertise, and dedication of an organizations workforce. It recognizes that even in the age of high technology, people are the indispensable human resources whose knowledge and performance advance the organizations purpose, mission, and strategies. Only through human efforts can the great advantages be realized from other material resources of organizations, such as, technology, information, raw materials, and money.
Mr Prabhakar needs to do Individual level of analysis. This level of analysis at individual level is more related to the study of aspects like learning, perception, creativity, motivation, personality, turnover, task performance, cooperative behavior, deviant behavior, ethics, and cognition. Remuneration of personnel: this may be achieved by various methods but it should be fair, encourage effort, and not lead to overpayment. Individuals will be motivated to exhibit the modeled behavior if positive incentives or rewards are provided. Finally, in order for observational learning to be successful, you have to be motivated to imitate the behavior that has been modeled. Reinforcement and punishment play an important role in motivation. While experiencing these motivators can be highly effective, so can observing other experience some type of reinforcement or punishment? For example, if you see another student rewarded with extra credit for being to class on time, you might start to show up a few minutes early each day. Through Individual level of analysis Mr. Prabhakar can shape employee behavior.
Q.3 Write a detailed note on Myers-Briggs type indicator.
Ans. The MyersBriggs Type Indicator: The MBTI classifies human beings into four opposite pairs (dichotomies), base on their psychological opposites. These four opposite pairs result into 16 possible combinations. In MBTI, Individuals are classified as (McCrae and Costa, 1989) :-
a. Extroverted or introverted (E or I).
b. Sensing or intuitive (S or N).
c. Thinking or feeling (T or F).
d. Perceiving or judging (P or J).
These classifications are then combined into sixteen personality types. For example: –
a. INTJs are visionaries. They usually have original minds and great drive for their own ideas and purposes. They are characterized as skeptical, critical, independent, determined, and often stubborn.
b. ESTJs are organizers. They are realistic, logical, analytical, decisive, and have a natural head for business or mechanics. They like to organize and run activities.
c. The ENTP type is a conceptualizer. He or she is innovative, individualistic, versatile, and attracted to entrepreneurial ideas. This person tends to be resourceful in solving challenging problems but may neglect routine assignments.
The big five model
Many researchers argue that five basic dimensions underlie all other personality dimensions (e.g; McCrae and Costa, 1990; Digman, 1997). The five basic dimensions are:
1. Extraversion. Comfort level with relationships. Extraverts tend to be gregarious, assertive, and sociable. Introverts tend to be reserved, timid, and quiet.
2. Agreeableness. Individual’s propensity to defer to others. High agreeableness people—cooperative, warm, and trusting. Low agreeableness people—cold, disagreeable, and antagonistic.
3. Conscientiousness. A measure of reliability. A high conscientious person is responsible, organized, dependable, and persistent. Those who score low on this dimension are easily distracted, disorganized, and unreliable.
4. Emotional stability. A person’s ability to withstand stress. People with positive emotional stability tend to be calm, selfconfident, and secure. Those with high negative scores tend to be nervous, anxious, depressed, and insecure.
5. Openness to experience. The range of interests and fascination with novelty. Extremely open people are creative, curious, and artistically sensitive. Those at the other end of the openness category are conventional and find comfort in the familiar.
Research suggested important relationships between these personality dimensions and job performance (Barrick, & Mount , 1991). For example, conscientiousness predicted job performance for all occupational groups. Individuals who are dependable, reliable, careful, thorough, able to plan, organized, hardworking, persistent, and achievement oriented tend to have higher job performance. Employees higher in conscientiousness develop higher levels of job knowledge. For the other personality dimensions, predictability depended upon both the performance criterion and the occupational group. Extraversion predicted performance in managerial and sales positions. Openness to experience is important in predicting training proficiency.
Q.4 Explain the factors influencing perception
Ans. Factors Influencing Perception: Three factors shape perception of an individual:-
1. Perceiver
2. Target
3. Situation
Perceiver – Refers to the most prevalent personal characteristics affecting perception of the perceiver, which are attitudes, motives, interests, past experiences, and expectations.
Target- Characteristics of the target can also affect what is being perceived. This includes, attractiveness, gregariousness, and an individual’s tendency to group similar things together.
Situation- The context in which objects or events are seen by individuals also influence their attention. This includes time, heat, light, or other situational factors.
Perception is our sensory experience of the world around us and involves both the recognition of environmental stimuli and action in response to these stimuli. Through the perceptual process, we gain information about properties and elements of the environment that are critical to our survival. A number of factors operate to shape and sometimes distort perception These factors can reside:-
i) In the perceiver
ii) In the Object or target being perceived or
iii) In the context of the situation in which the perception is made.
1. Characteristics of the Perceiver: Several characteristics of the perceiver can affect perception. When an individual looks at a target and attempts to interpret what he or she stands for, that interpretation is heavily influenced by personal characteristics of the individual perceiver. The major characteristics of the perceiver influencing perception are:
a) Attitudes: The perceiver’s attitudes affect perception. For example, Mr. X is interviewing candidates for a very important position in his organization – a position that requires negotiating contracts with suppliers, most of whom are male. Mr. X may feel that women are not capable of holding their own in tough negotiations. This attitude with doubtless affect his perceptions of the female candidates he interviews.
b) Moods: Moods can have a strong influence on the way we perceive someone. We think differently when we are happy than we do when we are depressed. In addition, we remember information that is consistent with our mood state better than information that is inconsistent with our mood state. When in a positive mood, we form more positive impressions of other. When in a negative mood, we tend to evaluate others unfavourably.
c) Motives: Unsatisfied needs or motives stimulate individuals and may exert a strong influence on their perceptions. For example, in an organizational context, a boss who is insecure perceives a sub ordinate’s efforts to do an outstanding job as a threat to his or her own position. Personal insecurity can be translated into the perception that others are out to “get my job”, regardless of the intention of the subordinates.
d) Self – Concept: Another factor that can affect social perception is the perceivers self-concept. An individual with a positive self-concept tends to notice positive attributes in another person. In contrast, a negative self-concept can lead a perceiver to pick out negative traits in another person. Greater understanding of self allows us to have more accurate perceptions of others.
e) Interest: The focus of our attention appears to be influenced by our interests. Because our individual interests differ considerably, what one person notices in a situation can differ from what other perceive. For example, the supervisor who has just been reprimanded by his boss for coming late is more likely to notice his colleagues coming late tomorrow than he did last week.
f) Cognitive structure: Cognitive structure, an individual’s pattern of thinking, also affects perception. Some people have a tendency to perceive physical traits, such as height, weight, and appearance, more readily. Cognitive complexity allows a person to perceive multiple characteristics of another person rather than attending to just a few traits.
g) Expectations: Finally, expectations can distort your perceptions in that you will see what you expect to see. The research findings of the study conducted by Sheldon S Zalking and Timothy W Costello on some specific characteristics of the perceiver reveal
i) Knowing oneself makes it easier to see others accurately.
ii) One’s own characteristics affect the characteristics one is likely to see in other.
iii) People who accept themselves are more likely to be able to see favourable aspects of other people.
iv) Accuracy in perceiving others is not a single skill.
These four characteristics greatly influence how a person perceives other int he environmental situation.
2) Characteristics of the Target : Characteristics in the target that is being observed can affect what is perceived. Physical appearance pals a big role in our perception of others. Extremely attractive or unattractive individuals are more likely to be noticed in a group than ordinary looking individuals. Motions, sound, size and other attributes of a target shape the way we see it.
Verbal Communication from targets also affects our perception of them. Nonverbal communication conveys a great deal of information about the target. The perceiver deciphers eye contact, facial expressions, body movements, and posture all in a attempt to form an impression of the target.
3) Characteristics of the Situation: The situation in which the interaction between the perceiver and the target takes place, has an influence on the perceiver’s impression of the target. The strength of the situational cues also affects social perception. Some situations provide strong cues as to appropriate behaviour. In this situation, we assume that + i.e individual’s behaviours can be accounted for by the situation, and that it may not reflect the individual’s disposition.
Q.5 Describe the leadership Grid with the help of the diagram.
Ans. The Leadership Grid: Robert Blake and Jane Mouton developed theory called the Leadership Grid, focusing on production/relationship orientations. They went a little further by creating a grid based on Leaders’ concern for people (relationships) and production (tasks). This theory suggest there is a best way to lead people the 9,9 way.
The Major Leadership Grid Styles
1,1 Impoverished management. Often referred to as Laissez-faire leadership. Leaders in this position have little concern for people or productivity, avoid taking sides, and stay out of conflicts. They do just enough to get by.
1,9 Country Club management. Managers in this position have great concern for people and little concern for production. They try to avoid conflicts and concentrate on being well liked. To them the task is less important than good interpersonal relations. Their goal is to keep people happy. (This is a soft Theory X approach and not a sound human relations approach.)
9,1 Authority-Compliance. Managers in this position have great concern for production and little concern for people. They desire tight control in order to get tasks done efficiently. They consider creativity and human relations to be unnecessary.
5,5 Organisation Man Management. Often termed middle-of-the-road leadership. Leaders in this position have medium concern for people and production. They attempt to balance their concern for both people and production, but they are not committed.
9+9 Paternalistic “father knows best” management. A style in which reward is promised for compliance and punishment threatened for non-compliance
Opp Opportunistic “what’s in it for me” management. In which the style utilised depends on
which style the leader feels will return him or her the greatest self-benefit.
9,9 Team Management. This style of leadership is considered to be ideal. Such managers have great concern for both people and production. They work to motivate employees to reach their highest levels of accomplishment. They are flexible and responsive to change, and they understand the need to change.

Q.6 Given below are certain observations done by an OD consultant for an organization dealing with manufacturing of tyres. She makes the following observations about two key people in the organization.
1. Mr. Raovikram – He is a very friendly person and encourages his team members by giving them recommendations and appreciation. This helps HR to decide about giving a bonus or promotion to employees.
2. Mr. Ranjan kumar- He is an aggressive person. He frequently loses his temper. Ritu observes that he frequently punishes the non-performers and also gives them warnings regarding suspension etc. Now explain what base of power Mr. Raovikram and Mr. Ranjan Kumar belong to. Explain the type of power they use often.
Ans. Power is the ability to make things happen in the way an individual wants, either by self or by the subordinates. The essence of power is control over the behavior of others (French & Raven, 1962). Managers derive power from both organizational and individual sources. These sources are called position power and personal power, respectively. In an organizational context leadership and power are related to each others. Power is used by leaders as a means to attain group goals. In other words, power is a means of facilitating their achievement of goals and objectives that they have set for themselves in view of organizational requirements. Power can be categorized into two types: Formal and informal.
Formal Power: is based on the position of an individual in an organization. Formal power is derived from either one’s ability to coerce or reward others or is derived from the formal authority vested in the individual due to his/ her strategic position in the organizational hierarchy. Formal power may be categorized into four types: Coercive Power, Reward Power, Legitimate Power, Information Power.
1. Coercive Power: The coercive power base is being dependent on fear. It is based on the application, or the threat of application, of physical sanctions such as the infliction of pain, the generation of frustration through restriction of movement, or the controlling by force of basic physiological or safety needs. In an organization one can exercise power over another if they have the power to dismiss, suspend, demote another assuming that the job is valuable to the person on whom power is being unleashed.
Mr. Ranjan kumar as he is an aggressive person by nature frequently losing his temper and frequently punishes the non-performers and also gives them warnings regarding suspension etc creates fear and threat which generate frustration. So, Mr. Ranjan kumar power is based on coercive power
2. Reward Power:
The opposite of coercive power is reward power. Reward power is the extent to which a manager can use extrinsic and intrinsic rewards to control other people. Examples of such rewards include money, promotions, compliments, or enriched jobs. Although all managers have some access to rewards, success in accessing and utilizing rewards to achieve influence varies according to the skills of the manager.
Reward Power can be gained from one’s capacity to reward compliance. Reward power is used to support legitimate power. When someone is rewarded or might receive a potential reward such as through recognition, a good job assignment, a pay rise, or additional resources to complete a job, the employee may respond in kind by carrying through with orders, requests and directions, according to Gibson et al. (1991:331).
Rewards often comprises financial remuneration. They can also be intangible as well. Studies have revealed that verbal approval, encouragement and praise can very often be very positive substitutes in place of tangible rewards. Experiments involving positive reinforcement and behaviour modification in the classroom or work setting revealed that verbal rewards could consist of: ‘ extreme politeness’, ‘ compliments’, and ‘praise’ for past behaviour.
Non-verbal rewards might comprise: “Giving individuals in the other party more space at the table” Nodding of the head to signal your acceptance and that you approve; “Eye contact to indicate attention” and “By using open and non-aggressive gestures to designate acceptance and respect.” Rewards could also consist of verbal promises to gain financially by establishing a relationship. Ingratiation is occasionally referred to as the ‘art of flattery’. It is one example of the use of reward power in social settings. Friedman, Carlsmith and Sears (1974) provide a fascinating synopsis on the affect of ingratiation in interpersonal situations. Many of us realize that if other people like us, they will be more prepared to perform favours for us. On the other hand, we are also aware that they will be less likely or carry out actions if they dislike us. ” Individuals seeking to increase others’ liking of them can convince these persons that they share basic values or are similar in other ways. ”
The most common tactic of ingratiation in negotiation is to complement the abilities of the people whom you wish to influence. This tactic, frequently referred to as “other enhancement” often entails the use of flattery – the exaggerated praise of others. Such a tactic usually succeeds because people tend to like the flatterer who is praising them.
It is common that the use of reward power seems to be very effective, particularly in the longer term. Reward power is occasionally combined with coercive power, although the two different forms of power can be subject to semantic confusion. It is important to understand coercive power before comparing it with and measuring it against reward power.
Mr. Raovikram is a very friendly person and encourages team members by giving them recommendations and appreciation which helps HR to decide about giving a bonus or promotion to employees by using power based on reward power.

mb0038 st 2
Q.1 Write a detailed note on management theories developed during classical Era.
Ans. We see this trend to continue in what is called as the classical era which covers the period between 1900 to mid 1930s. the first general theories of management began to evolve and the main contributors during this era were Frederick Taylor, Henri Fayol, Max Weber, Mary parker Follet and Chester Barnard.
Frederick Taylor’s main emphasis was on finding one best way of doing each job. He stressed on selecting the right people for the job , train them to do it precisely in one best way. He favored wage plans to motivate the workers. His scientific principles of management stressed the following principles:-
1. Shift all responsibility for the organization of work from the worker to the manager; managers should do all the thinking relating to the planning and design of work, leaving the workers with the task of implementation.
2. Use scientific methods to determine the most efficient way of doing work; assign the worker’s task accordingly, specifying the precise way in which the work is to be done.
3. Select the best person to perform the job thus designed.
4. Train the worker to do the work efficiently.
5. Monitor worker performances to ensure that appropriate work procedures are followed and that appropriate results are achieved.
Taylor was one of the first to attempt to systematically analyze human behavior at work. He insisted the use of time and motion study as a means of standardizing work activities. His scientific approach called for detailed observation and measurement of even the most routine work, to find the optimum mode of performance.
The results were dramatic, with productivity increasing significantly. With passing time, new organizational functions like personnel and quality control were created. Of course, in breaking down each task to its smallest unit to find what Taylor called ‘‘the one best way’’ to do each job, the effect was to remove human variability. Hence he lay the ground for the mass production techniques that dominated management thinking in the first half of the twentieth century.
Henri Fayol, a mining engineer and manager by profession, defined the nature and working patterns of the twentieth century organization in his book, General and Industrial Management, published in 1916. In it, he laid down what he called 14 principles of management. This theory is also called the Administrative Theory. The principles of the theory are:-
1. Division of work: tasks should be divided up with employees specializing in a limited set of tasks so that expertise is developed and productivity increased.
2. Authority and responsibility: authority is the right to give orders and entails enforcing them with rewards and penalties; authority should be matched with corresponding responsibility.
3. Discipline: this is essential for the smooth running of business and is dependent on good leadership, clear and fair arguments, and the judicious application of penalties.
4. Unity of command: for any action whatsoever, an employee should receive orders from one superior only; otherwise authority, discipline, order, and stability are threatened.
5. Unity of direction: a group of activities concerned with a single objective should be co-coordinated by a single plan under one head.
6. Subordination of individual interest to general interest: individual or group goals must not be allowed to override those of the business.
7. Remuneration of personnel: this may be achieved by various methods but it should be fair, encourage effort, and not lead to overpayment.
8. Centralization: the extent to which orders should be issued only from the top of the organization is a problem which should take into account its characteristics, such as size and the capabilities of the personnel.
9. Scalar chain (line of authority): communications should normally flow up and down the line of authority running from the top to the bottom of the organization, but sideways communication between those of equivalent rank in different departments can be desirable so long as superiors are kept informed.
10. Order: both materials and personnel must always be in their proper place; people must be suited to their posts so there must be careful organization of work and selection of personnel.
The management function, Fayol stated, consisted of planning, organizing, commanding, co-coordinating and controlling. Many practicing managers, even today, list these functions as the core of their activities. Fayol was also one of the first people to characterize a commercial organization’s activities into its basic components. He suggested that organizations could be subdivided into six main areas of activity:
1. Technical
2. Commercial
3. Financial
4. Security
5. Accounting
6. Management.
In defining the core principles governing how organizations worked and the contribution of management to that process, Fayol laid down a blueprint that has shaped organization thinking for almost a century.
Max Weber developed a theory based on authority relations and was he a pioneer in looking at management and OB from a structural viewpoint. His theory is also known as bureaucratic theory in management. he described an ideal types of organization and called it a bureaucracy. This was a system marked by division of labor, a clearly defined hierarchy, detailed rules and regulations and impersonal relationships. He wanted this ideal types construct to be taken as a basis for creating organizations in real world.
Q.2. Write a short note on: (a) Contemporary work cohort (b) Alexithymia
Ans. (a) Contemporary work cohort
Robbins (2003) has proposed Contemporary Work Cohort, in which the unique value of different cohorts is that the U.S. workforce has been segmented by the era they entered the workforce. Individuals’ values differ, but tend to reflect the societal values of the period in which they grew up. The cohorts and the respective values have been listed below:-
1. Veterans— Workers who entered the workforce from the early 1940s through the early 1960s. They exhibited the following value orientations:-
They were influenced by the Great Depression and World War II
1. Believed in hard work
2. Tended to be loyal to their employer
3. Terminal values: Comfortable life and family security
2. Boomers— Employees who entered the workforce during the 1960s through the mid1980s belonged to this category. Their value orientations were:-
1. Influenced heavily by John F. Kennedy, the civil rights and feminist movements, the Beatles, the Vietnam War, and baby boom competition
2. Distrusted authority, but gave a high emphasis on achievement and material success
3. Organizations who employed them were vehicles for their careers
4. Terminal values: sense of accomplishment and social recognition
3. Xers— began to enter the workforce from the mid1980s. They cherished the following values:-
1. Shaped by globalization, two career parents, MTV, AIDS, and computers
2. Value flexibility, life options, and achievement of job satisfaction
3. Family and relationships were important and enjoyed team oriented work
4. Money was important, but would trade off for increased leisure time
5. Less willing to make personal sacrifices for employers than previous generations
? Terminal values: true friendship, happiness, and pleasure
4. Nexters— most recent entrants into the workforce.
1. Grew up in prosperous times, have high expectation, believe in themselves, and confident in their ability to succeed
2. Neverending search for ideal job; see nothing wrong with jobhopping
3. Seek financial success
4. Enjoy team work, but are highly selfreliant
5. Terminal values: freedom and comfortable life
(b) Alexithymia – emotional disorder
Some people have difficulty in expressing their emotions and understanding the emotions of others. Psychologists call this alexithymia. People who suffer from alexithymia rarely cry and are often seen by others as bland and cold. Their own feelings make them uncomfortable, and they are not able to discriminate among their different emotions. People, suffering from alexithymia, may be effective performers in jobs where little or no emotional labor. Alexithymic symptoms may be seen in people who experience:
1. Posttraumatic stress disorder
2. Certain brain injuries
3. Eating disorders (i.e., bulimia, anorexia, or bingeeating disorder)
4. Substance use dependence
5. Depression
6. Other mental health conditions
A number of research findings supports the view that women are more emotional than men (e.g., Broverman, Vogel, Broverman, Clarkson, & Rosenkrantz, 1972; Widiger & Settle, 1987). Women are assumed to experience more frequent and intense emotions, whereas men are assumed to be emotionally inexpressive and to have less intense emotional experiences. However, researchers have argued that the stereotype of men as unemotional is more accurate for adult targets than for child targets because males learn to control their emotions as they get older (Fabes and Martin, 1991). Likewise, women and men may experience happiness in a similar way, but women have been taught that they can strongly express the emotion of happiness, whereas men have been taught to control it. The impact of socialization practices accumulate over time, and, thus, these stereotypes
are likely to apply more strongly to adult populations (Geer and Shields, 1996).
Q.3 Mr. Khanna wants to improve his conflict management skills. He visits a consultant to help him. He gives the list of situations to the consultant.
The situations are:
1. When quick, decisive action is vital (e.g., emergencies).
2. On important issues where unpopular actions need implementing (e.g., cost cutting, enforcing unpopular rules, discipline).
3. To merge insights from people with different perspectives.
4. When you perceive no chance of satisfying your concerns.
5. When issues are more important to others than to you – to satisfy others and maintain cooperation.
6. To gain commitment by incorporating concerns into a consensus.
7. On issues vital to company welfare when you know you are right.
Suppose that you are the consultant, first suggest appropriate approach for each situation and then explain briefly the approaches. [10]
Ans
Q.4 Explain General Adaptation syndrome (GAS) [10]
Ans. Doctors call the body’s reaction to stress as General Adaptation Syndrome (GAS). There are three stages to GAS.
In the first stage of GAS called alarm reaction, the body releases adrenaline and a variety of other psychological mechanisms to combat the stress and to stay in control. This is called fight or flight response. The muscles tense, the heart beats faster, the breathing and perspiration increases, the eyes dilate, the stomach may clench. Believe it or not, this is done by nature to protect you in case something bad happens. Once the cause of the stress is removed, the body will go back to normal.
If the cause for the stress is not removed, GAS goes to its second stage called resistance or adaptation. This is the body’s response to long term protection. It secretes further hormones that increase blood sugar levels to sustain energy and raise blood pressure. The adrenal cortex (outer covering) produces hormones called corticosteroids for this resistance reaction. Overuse by the body’s defense mechanism in this phase eventually leads to disease. If this adaptation phase continues for a prolonged period of time without periods of relaxation and rest to counterbalance the stress response, sufferers become prone to fatigue, concentration lapses, irritability and lethargy as the effort to sustain arousal slides into negative stress.
The third stage of GAS is called exhaustion. In this stage, the body has run out of its reserve of body energy and immunity. Mental, physical and emotional resources suffer heavily. The body experiences “adrenal exhaustion”. The blood sugar levels decrease as the adrenals become depleted, leading to decreased stress tolerance, progressive mental and physical exhaustion, illness and collapse.
The hypothalamus-pituitary-adrenal (HPA) chain of command has served humans well as a means of survival for thousands of years. However, for those suffering from chronic anxiety and depression this process malfunctions. Continual stress early in life disrupts the cycle. Instead of shutting off once the crisis is over, the process continues, with the hypothalamus continuing to signal the adrenals to produce cortisol. This increased cortisol production exhausts the stress mechanism, leading to fatigue and depression. Cortisol also interferes with serotonin activity, furthering the depressive effect.
Continually high cortisol levels lead to suppression of the immune system through increased production of interleukin-6, an immune-system messenger. This coincides with research findings indicating that stress and depression have a negative effect on the immune system. Reduced immunity makes the body more susceptible to everything from cold and flu to cancer. For example, the incidence of serious illness, including cancer, is significantly higher among people who have suffered the death of a spouse in the previous year. Fortunately, this immune-suppression process can be corrected with psychotherapy, medication, or any number of other positive influences that restore hope and a feeling of self-esteem. The ability of human beings to recover from adversity is remarkable.
Thus, very often, those under severe, prolonged stress may contract diseases related to immune deficiency and may even die of these diseases. The death does not come from stress itself. What happens is that the body loses all its resistance in its effort to ward off the stress. Thus the persons die of immune deficiency causes such as infection, cancer etc. So, it is very important that we recognize the cause for stresses and remove the causes to maintain a healthy lifestyle.
Another result of stress is the clogging of the arteries by the fat and cholesterol released by the body during the attempt to fight stress. This may result in a heart attack or you may suffer a stroke by losing blood supply to the brain. Many people start drinking to combat the stress. Stress can also manifest itself into a number of diseases – depression, headaches, insomnia, ulcers, asthma, and more.
When a person experiences stress, the brain responds by initiating 1400 different responses including the dumping of a variety of chemicals to our blood stream. This gives a momentary boost to do whatever needs to be done to survive. If left unchecked, however, the person can have a heart attack or stroke. Many people start drinking alcohol. They get depressed, find it difficult to sleep, experience chest pain. The body runs out of the immunity to fight diseases. So, very often, these persons die of disease such as cancer, pneumonia, etc. The stress will never be identified as the cause of the death. I call the stress the proxy killer. Some other disease always takes the blame for it.

Q.5 What is groupthink what are its symptoms and also suggest measures to prevent groupthink. [10]
Ans. Groupthink, a term coined by social psychologist Irving Janis (1972), occurs when a group makes faulty decisions because group pressures lead to a deterioration of “mental efficiency, reality testing, and moral judgment” (p. 9). Groups affected by groupthink ignore alternatives and tend to take irrational actions that dehumanize other groups. A group is especially vulnerable to groupthink when its members are similar in background, when the group is insulated from outside opinions, and when there are no clear rules for decision making.
Symptoms of Groupthink
Janis has documented eight symptoms of groupthink:-
1. Illusion of invulnerability –Creates excessive optimism that encourages taking extreme risks.
2. Collective rationalization – Members discount warnings and do not reconsider their assumptions.
3. Belief in inherent morality – Members believe in the rightness of their cause and therefore ignore the ethical or moral consequences of their decisions.
4. Stereotyped views of out-groups – Negative views of “enemy” make effective responses to conflict seem unnecessary.
5. Direct pressure on dissenters – Members are under pressure not to express arguments against any of the group’s views.
6. Self-censorship – Doubts and deviations from the perceived group consensus are not expressed.
7. Illusion of unanimity – The majority view and judgments are assumed to be unanimous.
8. Self-appointed ‘mindguards’ – Members protect the group and the leader from information that is problematic or contradictory to the group’s cohesiveness, view, and/or decisions.
When the above symptoms exist in a group that is trying to make a decision, there is a reasonable chance that groupthink will happen, although it is not necessarily so. Groupthink occurs when groups are highly cohesive and when they are under considerable pressure to make a quality decision. When pressures for unanimity seem overwhelming, members are less motivated to realistically appraise the alternative courses of action available to them. These group pressures lead to carelessness and irrational thinking since groups experiencing groupthink fail to consider all alternatives and seek to maintain unanimity. Decisions shaped by groupthink have low probability of achieving successful outcomes.
Remedies for Groupthink
Decision experts have determined that groupthink may be prevented by adopting some of the following measures:-
a) The leader should assign the role of critical evaluator to each member
b) The leader should avoid stating preferences and expectations at the outset
c) Each member of the group should routinely discuss the groups’ deliberations with a trusted associate and report back to the group on the associate’s reactions
d) One or more experts should be invited to each meeting on a staggered basis. The outside experts should be encouraged to challenge views of the members.
e) At least one articulate and knowledgeable member should be given the role of devil’s advocate (to question assumptions and plans)
f) The leader should make sure that a sizeable block of time is set aside to survey warning signals from rivals; leader and group construct alternative scenarios of rivals’ intentions.

Q.6 Unique fashions is a textile company. it is undergoing a process of change and expanding its business. The company is facing several obstacles. There are lot of problems related to different departments. It needs some Intervention that may help the company to diagnose its problems and developing the action plan for problem solving. The company also expects that the intervention should help in improving the relationships amongst group members of different departments. [10]
Ans. The Unique fashions Development textile company should uses a variety of processes, approaches, methods, techniques, applications, etc., (these are often termed “interventions”) to address organizational issues and goals in order to increase performance. The following partial list of interventions is organized generally in the order presented by Cummings and Worley in their “Organization Development and Change” (West Publishing, 1993). The following types of interventions are often highly integrated with each other during a project for change.
How People Choose Organizational Development Activities
There are no standard activities that always successfully address certain types of issues in organizations. Many times, the success of a project lies not with having selected the perfect choice of activities, but rather with how honest and participative people were during the project, how much they learned and how open they were to changing their plans for change.
However, there are some basic considerations that most people make when selecting from among the many choices for organizational development, or capacity building, activities. Considerations include:-
1. First, does the change-management method (if one was used) suggest what organizational development activities to use now, for example, the method of strategic management might suggest that a SWOT analysis be done, strategic goals be established along with action plans for each goal, and then implementation of the action plans be closely monitored.
2. Is the activity most likely to address the findings from the discovery, that is, to solve the problems or achieve the goals? To find out, review any research about use of the activity, discuss the potential outcomes with experts and also with members of the organization. Consider posing your questions in online groups of experts about change.
3. Does the nature of the activity match the culture of the organization? The best way to find out is to discuss the activity with members of the organization.
4. Does the change agent and key members of the organization have the ability to conduct the activity? For example, technostructural and strategic interventions sometimes require technical skills that are not common to many people.
5. Does the activity require more time to conduct than the time available in which to address the problem or goal? For example, a cash crisis requires immediate attention, so while a comprehensive strategic planning process might ultimately be useful, the four to five months to do that planning is impractical.
6. Does the client’s organization have the resources that are necessary to conduct the activity, considering resources such as funding, attention and time from people and facilities.
Before you and your client select types of interventions for the project, be aware of your strong biases about how you view organizations. Without recognizing those biases, you might favor certain types of interventions primarily because those are the only ones you can readily see and understand, even if other types of interventions might be much more effective in your project.
Human Process Interventions (Group and Individual Human Relations)
With today’s strong emphasis on humanistic values, the following interventions are getting a great deal of attention and emphasis during efforts for change. They focus on helping members of the organization to enhance themselves, each other and the ways in which they work together in order to enhance their overall organization. Although the types of interventions selected for a project depend on a variety of considerations and the interventions in a project often are highly integrated with each other, the following human process interventions might be particularly helpful during change projects in organizations where there is some combination of the following: many new employees, different cultures working together, many complaints among organizational members, many conflicts, low morale, high turnover, ineffective teams, etc.
Technostructural Interventions (Structures, Technologies, Positions, etc.)
The following are examples of activities that focus on improving the performance of organizations primarily by modifying structures, technologies, operations, procedures and roles/positions in the organization. Although the types of interventions selected for a project depend on a variety of considerations and the interventions in a project often are highly integrated with each other, the following techno structural interventions might be particularly helpful in the following kinds of situations: rapid growth but few internal systems to sustain that growth, much confusion about roles, a new major technology or process has been introduced, many complaints from customers, etc. These interventions might also be useful in new organizations where internal operational systems must be developed and implemented.

Ans 1 ) Example Letter
John Doe
ABC Corporation
Sometown
Somewhere, NA 12345
Dear John,
I have just been made aware of the problems you encountered with your recent purchase of an XYZ Corp television.
We do our utmost to ensure our products arrive in perfect working order. On this occasion it seems we failed. I believe you have already been issued with a replacement.
Please accept my sincere apologies for this unfortunate incident, do not hesitate to contact me if you have any further queries.
Sincerely,
[Signature]
Manager

Answer 2) Example Press Release (Write On ur Own)
Colgate-Palmolive (India) Limited
Colgate Research Centre,
Main Street, Hiranandani Gardens,
Powai, Mumbai – 400 076.
INNOVATION FROM GARNIER FRUCTIS CONDITIONER + OIL 2 in 1
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Answer 4) Sample Letter (Write On ur own)

A. N. Other
B. Customer Services Director
Metropolitan Children’s Hospital
P. O. Box 411067
Philadelphia, Penn. 19002
Attn: Robin Boyd, Human Resources
Re: Director for Patient Financial Services
Dear Mrs. Boyd:
I was very interested to see your advertisement for a Director of Patient Financial Services in the Philadelphia Inquirer (8-11-06). I have been seeking just such an opportunity as this, and I think my background and your requirements may be a good match. My resume is enclosed for your review.
Of particular note for you and the members of your team as you consider this management placement are my strong accomplishments in reducing outstandings and reorganizing accounting and collections functions to achieve improved operating efficiency internally and improved cashflow for the institution as a whole.
Consider the following:
• Reduced A/R days from 110 to 60.4.
• Reduced staff by 6.5 FTEs with concurrent increase in total departmental performance.
• Reduced patient complaints with simultaneous increase in A/R collected.
• Improved cashflow by $1.6 million per month.
Additionally, my contributions have been mainly achieved by improving information flow within the patient financial services function, improving patient financial services utilization of already available MIS services, and improving cooperation between patient services and admissions, UR, contracting, and medical records functions.
After fifteen years in patient accounting, I have a thorough understanding of every aspect of this function in a modern hospital/medical center setting. My current employer is very happy with my performance, but I view myself as somewhat of a troubleshooter, and most of the reorganizations initiated here have already come to fruition, so I am eager to consider new challenges.
If you are seeking a manager who stays abreast of her field, who understands technology, who earns 100% staff support, and who is as career-committed as it takes to achieve total success, then please consider what I have to offer. I would be happy to have a preliminary discussion with you or members of your committee to see if we can establish a mutual interest. I will call you within the week to answer any initial questions you may have, and to hear about your hiring process.
Thank you for your attention to these materials. I certainly look forward to exploring this further.
Yours truly,
Brenda J. Wilson
Enclosure

Answer 6)
The job application process begins with writing resumes and
application letter. While a well drafted resume and application letter alone
can’t get you a job, they can certainly increase your chances of being
included in the “short list” of candidates to be considered. This unit offers
some useful guidelines for writhing effective resumes, application letter and
other types of employment letter.
A resume is a document that summarizes your background,
educational qualification, experience and interests. A career objective is
generally used in graduate resumes more experienced job seekers use a
professional objective.
The resume objective should be:
•
Describe the job application process
•
Contains resume action verbs.
•
Contains job & skill related keywords.
•
Explain how application letters should be tailored to the needs of
prospective employer.
•
Focus on the employer’s needs rather than on yours.
A career objective expresses what you want to achieve in your career and
which position you aspire to.
Specific career Objective:-
A good resume will have the some basic information or standard
components-
1)Contact info – This includes the name, address, telephone number
mobile number and email id. The information provides should allow a
prospective employer to reach you easily.
2)Objective-
An objective should be very specific, stating clearly
the position you are seeking and the area in which you want to work.
While not necessary, an objective statement gives focus to the
resume. It is a brief, one sentence statement which describes the goal
and purpose of your resume.
3)Education –
Since education is most likely the most prevalent
part of your experience so far, it is appropriate to list education early in
your resume. Educational qualifications should be listed in reverse

chronological order, starting with the most recent qualifications first.
The degree earned, the mane of the institution, and date of receiving
the degree should be mentioned. It is not always recommended to
include high school information, unless you feel it will add to your
profile.
4)Experience -The experience section of your resume is not limited to
paid experience. Some of your best experiences may have been at an
internship or volunteer position. List your title, the
company/organization for which you worked, dates worked, and a brief
description of your responsibilities. If your experience is limited, you
may also list part-time jobs, internship and voluntary work, under the
title “work experience”.
5)Skills -If you have significant computer skills, language skills,
computer skills or technical skills, you may want to create a section to emphasize them. You might also include any certifications or licenses you have if relevant.
6)References-
Stating that your “references are available on
request” is not necessary; however some people feel it gives closure to
the resume. If appropriate, you may state that a “portfolio is available
on request.” You can decide which works best for you.
7)Organizations and Activities – Membership of student and
professional associations, clubs and committees, offices held, as well as extra-curricular activities such as sports, music and photography, should be listed, in this section. This information gives prospective employers an idea of your aptitudes, attitudes and personality.

Management has been described as a social process involving responsibility for economical and effective planning & regulation of operation of an enterprise in the fulfillment of given purposes. It is a dynamic process consisting of various elements and activities. These activities are different from operative functions like marketing, finance, purchase etc. Rather these activities are common to each and every manger irrespective of his level or status.

Different experts have classified functions of management. According to George & Jerry, “There are four fundamental functions of management i.e. planning, organizing, actuating and controlling”. According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, & to control”. Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting & B for Budgeting. But the most widely accepted are functions of management given by KOONTZ and O’DONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.

For theoretical purposes, it may be convenient to separate the function of management but practically these functions are overlapping in nature i.e. they are highly inseparable. Each function blends into the other & each affects the performance of others.

Planning
It is the basic function of management. It deals with chalking out a future course of action & deciding in advance the most appropriate course of actions for achievement of pre-determined goals. According to KOONTZ, “Planning is deciding in advance – what to do, when to do & how to do. It bridges the gap from where we are & where we want to be”. A plan is a future course of actions. It is an exercise in problem solving & decision making. Planning is determination of courses of action to achieve desired goals. Thus, planning is a systematic thinking about ways & means for accomplishment of pre-determined goals. Planning is necessary to ensure proper utilization of human & non-human resources. It is all pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties, risks, wastages etc.

Organizing
It is the process of bringing together physical, financial and human resources and developing productive relationship amongst them for achievement of organizational goals. According to Henry Fayol, “To organize a business is to provide it with everything useful or its functioning i.e. raw material, tools, capital and personnel’s”. To organize a business involves determining & providing human and non-human resources to the organizational structure. Organizing as a process involves:

Identification of activities.
Classification of grouping of activities.
Assignment of duties.
Delegation of authority and creation of responsibility.
Coordinating authority and responsibility relationships.
Staffing
It is the function of manning the organization structure and keeping it manned. Staffing has assumed greater importance in the recent years due to advancement of technology, increase in size of business, complexity of human behavior etc. The main purpose o staffing is to put right man on right job i.e. square pegs in square holes and round pegs in round holes. According to Kootz & O’Donell, “Managerial function of staffing involves manning the organization structure through proper and effective selection, appraisal & development of personnel to fill the roles designed un the structure”. Staffing involves:

Manpower Planning (estimating man power in terms of searching, choose the person and giving the right place).
Recruitment, selection & placement.
Training & development.
Remuneration.
Performance appraisal.
Promotions & transfer.
Directing
It is that part of managerial function which actuates the organizational methods to work efficiently for achievement of organizational purposes. It is considered life-spark of the enterprise which sets it in motion the action of people because planning, organizing and staffing are the mere preparations for doing the work. Direction is that inert-personnel aspect of management which deals directly with influencing, guiding, supervising, motivating sub-ordinate for the achievement of organizational goals. Direction has following elements:

Supervision
Motivation
Leadership
Communication
Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching & directing work & workers.

Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Positive, negative, monetary, non-monetary incentives may be used for this purpose.

Leadership- may be defined as a process by which manager guides and influences the work of subordinates in desired direction.

Communications- is the process of passing information, experience, opinion etc from one person to another. It is a bridge of understanding.

Controlling
It implies measurement of accomplishment against the standards and correction of deviation if any to ensure achievement of organizational goals. The purpose of controlling is to ensure that everything occurs in conformities with the standards. An efficient system of control helps to predict deviations before they actually occur. According to Theo Haimann, “Controlling is the process of checking whether or not proper progress is being made towards the objectives and goals and acting if necessary, to correct any deviation”. According to Koontz & O’Donell “Controlling is the measurement & correction of performance activities of subordinates in order to make sure that the enterprise objectives and plans desired to obtain them as being accomplished”. Therefore controlling has following steps:

Establishment of standard performance.
Measurement of actual performance.
Comparison of actual performance with the standards and finding out deviation if any.
Corrective action.
Q.2 A company is selling a particular brand of tea and wishes to introduce a new flavor. How will the company forecast demand for it ?

To deliver the right products to the right customers probably requires a fundamental shift in retail decision making from art to science; and from one that is based on human intuition to one that is driven by customer data. Marshall Fisher and his collaborators pioneered this transformation by developing many rigorous and practical statistical and operations research methods for the
retailing industry. This ‘’Rocket Science” approach brings retail decision making to a whole new level of efficiency and sophistication.

Retail decision making begins with assortment planning and assortment drives pricing and inventory sizing decisions. It is thus apt for Fisher to begin his lecture on assortment planning. This commentary focuses on the excellent works of Fisher and collaborators in assortment planning and aims to achieve 2 goals. First, we will describe other research for demand forecasting (including
new products that have new attribute levels and lost sale due to imperfect demand substitution)
that may be better suited in some industries (e.g., frequently purchased consumer products). Sec-
ond, we highlight the importance of using alternative sources of data to validate their method of
estimating demand substitution, which uses managerial judgment. Our suggestions and approaches
may be added to the existing toolbox for effective retail decision making.
The key to determining an optimal assortment at a store lies in the correct characterization of
demand for each product and the substitution patterns across products. This characterization is
challenging because there are often a large number of products in a category and an even larger
number of substitution patterns. For example, if there are N products at a store, one must estimate
(N*(N-1))/2 substitution patterns even with the assumption of symmetry in substitution. The
estimation complexity for SKU demand can be substantially reduced if one represents products
as a bundle of attribute levels (e.g., brand, warranty, and size). By estimating demands for each
attribute level that SKU has, one can then derive a SKU demand from these attribute level demands
by a multiplicative model .
Let us use an example to demonstrate how this reduction in complexity works. If there are 37
brands, 9 sizes, and 145 avors in an ice-cream category, there are a total of 37 x 9 x 145 =
48,285 possible SKUs. Instead of estimating 48,285 product demands, one only needs to estimate
37+9+145 = 191 attribute level values. We further reduced the dimensionality burden by replacing
the attribute level values with behavioral equations that captured historical demand and substitu-
tion patterns . Our approach requires only 6 parameter estimates for each
attribute and hence a total of 18 parameter values for a product category that has 3 attributes.
Despite this parsimony, our approach shows the data well.
Both approaches use customer panel level data which may not be possible in some product categories either because such data cannot be captured or because the inter-purchase time is long. However, the key advantage of both approaches is that it allows for correlation in
demand at both the product and attribute levels by allowing their values to evolve as new purchases
are observed. (Fisher’s approach allows for correlation at the product but not at the attribute
level since it invokes the independence assumption in deriving SKU demand from attribute level
demands.) The correlation at the attribute level can sometimes be important. For example, Mary
may prefer chocolate avor but only from Ben & Jerry’s (in this case, demand are correlated across
brand and avor). In addition, our approach allows one to forecast demand for a new product
(with attribute levels that were previously not available in the category). For example, a store may
introduce a new avor to the ice-cream category. Our approach automatically imputes a starting
value for a new attribute level and uses it to forecast demand for any new product with that specific
attribute level. (The starting values capture the customer’s response to past introduction of new
attribute levels). As more purchase data come in, the approach will revise the starting value and
produce more accurate forecasts of the new attribute level value.
simplify the number of substitution pairs by incorporating managerial judgment. Store managers were asked to rule out unlikely substitution patterns and classify pos-
sible patterns into distinct classes of substitution probabilities. A potential problem of managerial
judgment is that store managers may exhibit systematic biases in classifying these substitution
patterns. Hence it may be important to validate human judgments using customer level data.
Specifically, one may use the consideration set formed by customers to validate. Consideration set
is the set of products that customers consider before their choice. One can determine consideration
set by eliciting it directly from customers via a survey or estimating it indirectly using a panel data
set. In an indirect estimation, a consideration set is frequently declined as the set of products that
deliver utilities above an empirically determined threshold. Thus, only products that are above the threshold are included for substitution.
As long as a customer who wishes to purchase a product cannot land a perfect product substitute
(i.e., the substitution probability is strictly less than 1), a sale may be lost. Under the Fisher’s
approach, lost sale is defined as 1 – substitution probability summed over all possible substitutes.
An alternative approach to estimate lost sale is to explicitly incorporate a purchase incidence
model, commonly used in marketing. develop such a model and use
the assortment and household’s expected inventory level as predictors for the purchase incidence
probability. Lost sale is then estimated to be the difference between a target assortment and the
actual assortment. This alternative method may work better with a panel level data set.

An old firm operating in the market for a long period will have the accumulated previous data on either production or sales pertaining to different years. If we arrange them in chronological order, we get what is called as ‘time series’. It is an ordered sequence of events over a period of time pertaining to certain variables. It shows a series of values of a dependent variable say, sales as it changes from one point of time to another. In short, a time series is a set of observations taken at specified time, generally at equal intervals. It depicts the historical pattern under normal conditions.
This method is not based on any particular theory as to what causes the variables to change but merely assumes that whatever forces contributed to change in the recent past will continue to have the same effect. On the basis of time series, it is possible to project the future sales of a company.
Further, the statistics and information with regard to the sales call for further analysis. When we represent the time series in the form of a graph, we get a curve, the sales curve. It shows the trend in sales at different periods of time. Also, it indicates fluctuations and turning points in demand. If the turning points are few and their intervals are also widely spread, they yield acceptable results. Here the time series show a persistent tendency to move in the same direction. Frequency in turning points indicates uncertain demand conditions and in this case, the trend projection breaks down.
The major task of a firm while estimating the future demand lies in the prediction of turning points in the business rather than in the projection of trends. When turning points occur more frequently, the firm has to make radical changes in its basic policy with respect to future demand. It is for this reason that the experts give importance to identification of turning points while projecting the future demand for a product.
The heart of this method lies in the use of time series. Changes in time series arise on account of the following reasons:
1. Secular or long run movements: Secular movements indicate the general conditions and direction in which graph of a time series move in relatively a long period of time.
2. Seasonal movements: Time series also undergo changes during seasonal sales of a company. During festival season, sales clearance season etc., we come across most unexpected changes.
3. Cyclical Movements: It implies change in time series or fluctuations in the demand for a product during different phases of a business cycle like depression, revival, boom etc.
4. Random movement: When changes take place at random, we call them irregular or random movements. These movements imply sporadic changes in time series occurring due to unforeseen events such as floods, strikes, elections, earth quakes, droughts and other such natural calamities. Such changes take place only in the short run. Still they have their own impact on the sales of a company.
An important question in this connection is how to ascertain the trend in time series? A statistician, in order to find out the pattern of change in time series may make use of the following methods –
1. The Least Squares method
2. The Free hand method
3. The moving average method
4. The method of semi – averages

Q.3 The supply of a product depends on the price. What are the other factors that will affect the supply of a product.
supply is the amount of some product producers are willing and able to sell at a given price all other factors being held constant. Usually, supply is plotted as a supply curve showing the relationship of price to the amount of product businesses are willing to sell.
In economics the term supply has a special meaning. It can be define in the following.
Supply schedule
A supply schedule is a table which shows how much one or more firms will be willing to supply at particular prices.[1] The supply schedule shows the quantity of goods that a supplier would be willing and able to sell at specific prices under the existing circumstances. Some of the more important factors affecting supply are the goods own price, the price of related goods, production costs, technology and expectations of sellers.
The Price of Inputs
In addition to the price of the product being the main factor as stated in the Law of Supply, the price of production inputs also plays a part. The lowest price at which a firm can sell a good without losing money is the amount of money that it costs to produce it. Producing a good or service involves taking inputs and applying a process to them to produce an output. The output is the finished good or service, and inputs are raw materials, labor, utilities, liscensing fees, or even other goods. These inputs are also known as factors of production. If the price of inputs goes up, the cost of producing the good increases. And therefore at each price producers need to sell their good for more money. So an increase in the price of inputs leads to a decrease in supply. Simarly, a decrease in the price of inputs leads to an increase in supply.
The Current State of Production Technology
Production of a good involves taking inputs, applying a process to them, and producing an output. Well, production technology is involved in the process part. Increases in the level of production technology can make that process more efficient. For example, imagine that you run a basic T-Shirt screen printing business out of your home. Now lets say you decide to invest in a workshop installed with the latest production technology. With this use of technology, the operation becomes more efficient and you are able increase the supply of T-shirts. If you decide to expand even further, some added technological improvements might be warranted. This further increases your ability to supply t-shirts since it reduces your labor costs. By automating the process, reliance upon labor is lessened and those resources are released for utilization elsewhere.
The Producer’s Expectations
It doesn’t just matter what is currently going on – one’s expectations can also affect how much of a product one is willing and able to sell. For example, if your firm produces mp3 players and you hear that Apple will soon introduce a new iPod that has more memory and longer battery life, you (and other producers) may decide to hurry up and sell your players to stores before the new iPod comes out. When people decide to increase production/sales today, they are increasing the current supply for mp3 players because of what they EXPECT to happen in the future.
The Number of Producers in the Market
As more or fewer producers enter the market this has a direct effect on the amount of a product that producers (in general) are willing and able to sell. More competition usually means a reduction in supply, while less competition gives the producer a opportunity to have a bigger market share with a larger supply.

Factors affecting supply
Innumerable factors and circumstances could affect a seller’s willingness or ability to produce and sell a good. Some of the more common factors are:
Goods own price: The basic supply relationship is between the price of a good and the quantity supplied. Although there is no “Law of Supply”, generally, the relationship is positive or direct meaning that an increase in price will induce and increase in the quantity supplied.

Price of related goods: For purposes of supply analysis related goods refer to goods from which inputs are derived to be used in the production of the primary good. For example, Spam is made from pork shoulders and ham. Both are derived from Pigs. Therefore pigs would be considered a related good to Spam. In this case the relationship would be negative or inverse. If the price of pigs goes up the supply of Spam would decrease (supply curve shifts up or in) because the cost of production would have increased. A related good may also be a good that can be produced with the firm’s existing factors of production. For example, a firm produces leather belts. The firm’s managers learn that leather pouches for smartphones are more profitable than belts. The firm might reduce its production of belts and begin production of cell phone pouches based on this information. Finally, a change in the price of a joint product will affect supply. For example beef products and leather are joint products. If a company runs both a beef processing operation and a tannery an increase in the price of steaks would mean that more cattle are processed which would increase the supply of leather.

Conditions of Production. The most significant factor here is the state of technology. If there is a technological advancement in one’s good’s production, the supply increases. Other variables may also affect production conditions. For instance, for agricultural goods, weather is crucial for it may affect the production outputs.

Expectations: Sellers expectations concerning future market condition can directly affect supply. If the seller believes that the demand for his product will sharply increase in the foreseeable future the firm owner may immediately increase production in anticipation of future price increases. The supply curve would shift out. Note that the outward shift of the supply curve may create the exact condition the seller anticipated, excess demand.

Price of inputs: Inputs include land, labor, energy and raw materials. If the price of inputs increases the supply curve will shift in as sellers are less willing or able to sell goods at existing prices. For example, if the price of electricity increased a seller may reduce his supply because of the increased costs of production. The seller is likely to raise the price the seller charges for each unit of output.

Number of suppliers – the market supply curve is the horizontal summation of the individual supply curves. As more firms enter the industry the market supply curve will shift out driving down prices.

Government policies and regulations:Government intervention can have a significant effect on supply.]Government intervention can take many forms including environmental and health regulations, hour and wage laws, taxes, electrical and natural gas rates and zoning and land use regulations.
This list is not exhaustive. All facts and circumstances that are relevant to a seller’s willingness or ability to produce and sell goods can affect supply. For example, if the forecast is for snow retail sellers will respond by increasing their stocks of snow sleds or skis or winter clothing or bread and milk.
Supply function and equation
The supply function is the mathematical expression of the relationship between supply and those factors that affect the willingness and ability of a supplier to offer goods for sale. For example, Qs = f(P, | Prg S) is a supply function where P equals price of the good Prg equals the price of related goods and S equals the number of producers. The vertical bar means that the variables to the right are being held constant. The supply equation is the explicit mathematical expression of the functional relationship. For example, Qs = 325 + P ? 30Prg + 20S. 325 is y-intercept it is the repository of all non-specified factors that affect supply for the product. P is the price of the own good. The coefficient is positive following the general rule that price and quantity supplied are directly related. Prg is the price of a related good. Typically the relationship is positive because the good is an input or a source of inputs.
Supply curve
The relationship of price and quantity supplied can be exhibited graphically as the supply curve. The curve is generally positively sloped. The curve depicts the relationship between two variables only; price and quantity supplied. All other factors affecting supply are held constant. However, these factors are part of the supply curve and are present in the intercept or constant term.
Movements versus shifts
Movements along the curve occur only if there is a change in quantity supplied caused by a change in the goods own price. A shift in the supply curve, referred to as a change in supply, occurs only if a non price determinant of supply changes. For example, if the price of an ingredient used to produce the good, a related good, were to increase, the supply curve would shift in.
Inverse Supply Equation
By convention economists graph the dependent variable on the y axis and the independent variable on the x axis. This means that the equation depicted is the inverse equation. The form of the inverse supply equation is Ps = f(Q). An example of an inverse supply equation would be .
Marginal costs and short-run supply curve
A firm’s short-run firm supply curve is the marginal cost curve above the shutdown point (the SRMC above the minimum average variable costs). The portion of the SRMC below the shutdown point is not part of the supply curve because the firm is not producing any output. The firm’s long run supply curve is that portion of the long run marginal cost curve above the minimum of the long run average cost curve.
Shape of the short-run supply curve
The Law of Diminishing Marginal Returns (LDMR) shapes the SRMC curve. The LDMR states that as production increases eventually a point (the point of diminishing marginal returns) will be reached after which additional units of output will be successively smaller. The mathematical relationship is where w is the wage rate and MPL. Beyond the point of diminishing marginal returns the marginal product of labor will continually decrease. As MPL decreases with a constant wage rate MC will increase.
From firm to market supply curve
The market supply curve is the horizontal summation of firm supply curves.
The shape of the market supply curve
There is no law of supply that “requires” that the market supply curve have a positive slope; the curve may slope down or up or be horizontal or vertical.
Elasticity
Price elasticity of supply measures the responsiveness of quantity supplied to changes in price, as the percentage change in quantity supplied induced by a one percent change in price. It is calculated for discrete changes as and for smooth changes of differentiable supply functions as . Since supply is usually increasing in price, the price elasticity of supply is usually positive. For example if the PES for a good is 0.67 a 1% rise in price will induce a two-thirds increase in quantity supplied.
Significant determinants include:
Reaction time: The PES coeffiecient will largely be determined by how quickly producers react to price changes by increasing (decreasing) production and delivering (cutting deliveries of) goods to the market.
Complexity of Production: Much depends on the complexity of the production process. Textile production is relatively simple. The labor is largely unskilled and production facilities are little more than buildings – no special structures are needed. Thus the PES for textiles is elastic. On the other hand, the PES for specific types of motor vehicles is relatively inelastic. Auto manufacture is a multi-stage process that requires specialized equipment, skilled labor, a large suppliers network and large R&D costs.

Time to respond: The more time a producer has to respond to price changes the more elastic the supply. For example, a cotton farmer cannot immediately respond to an increase in the price of soybeans.

Excess capacity: A producer who has unused capacity can quickly respond to price changes in his market assuming that variable factors are readily available.

Inventories: A producer who has a supply of goods or available storage capacity can quickly respond to price changes.
Other elasticities can be calculated for non-price determinants of supply. For example, the percentage change the amount of the good supplied caused by a one percent increase in the price of a related good is an input elasticity of supply if the related good is an input in the production process. An example would be the change in the supply for cookies caused by a one percent increase in the price of sugar.
Elasticity along linear supply curves
The slope of a linear supply curve is constant. The coefficient of elasticity is usually not. If the linear supply curve intersects the y-axis PES will be infinitely elastic at the point of intersection. The coefficient of elasticity decreases as one move “up” the curve. However, all points on the supply curve will have a coefficient of elasticity greater than one. If the linear supply curve intersects the x axis PES will equal zero at the point of intersection and will increase as one moves up the curve. However, all points on the curve will have a coefficient of elasticity less than 1. If the linear supply curve intersects the origin PES equals one at the point of origin and along the curve.
Market structure and the supply curve
There is no such thing as a monopoly supply curve. Perfect competition is the only market structure for which a supply function can be derived. A function is a rule which assigns to each value of a variable one and only one value of the function.] In a perfectly competitive firm the price is given. A manager of a competitive firm can tell you precisely what quantity of goods will be supplied for any price by simply referring to the firm’s marginal cost curve. To generate his supply function the seller could simply initially set price equal to zero and then incrementally increase the price at each price level he could calculate the quantity supplied using the supply equation Following this process the manager could trace out the complete supply function. A monopolist cannot replicate this process. A change in demand can result in the “changes in price with no changes in output, changes in output with no changes in price or both”. There is simply not a one to one relationship between price and quantity supplied. There is no single function that relates price to quantity supplied.

Q.4 Show how producers equilibrium is achieved with isoquants and isocost curves.

The Isoquant / Isocost Approach:

The least cost combination of-factors or producer’s equilibrium is now explained with the help of iso-product curves and isocosts. The optimum factors combination or the least cost combination refers to the combination of factors with which a firm can produce a specific quantity of output at the lowest possible cost.

As we know, there are a number of combinations of factors which can yield a given level of output. The producer has to choose, one combination out of these which yields a given level of output with least possible outlay. The least cost combination of factors for any level of output is that where the iso-product curve is tangent to an isocost curve. The analysis of producers equilibrium is based on the following assumptions.

Assumptions of Optimum Factor Combination:

The main assumptions on which this analysis is based areas under:

(a) There are two factors X and Y in the combinations.

(b) All the units of factor X are homogeneous and so is the case with units of factor Y.

(c) The prices of factors X and Y are given and constants.

(d) The total money outlay is also given.

(e) In the factor market, it is the perfect completion which prevails. Under the conditions assumed above, the producer is in equilibrium, when the following two conditions are fulfilled.

(1) The isoquant must be convert to the origin.

(2) The slope of the Isoquant must be equal to the slope of isocost line.

Diagram/Figure:

The least cost combination of factors is now explained with the help of figure 12.9.

Here the isocost line CD is tangent to the iso-product curve 400 units at point Q. The firm employs OC units of factor Y and OD units of factor X to produce 400 units of output. This is the optimum output which the firm can get from the cost outlay of Q. In this figure any point below Q on the price line AB is desirable as it shows lower cost, but it is not attainable for producing 400 units of output. As regards points RS above Q on isocost lines GH, EF, they show higher cost.

These are beyond the reach of the producer with CD outlay. Hence point Q is the least cost point. It is the point which is the least cost factor combination for producing 400 units of output with OC units of factor Y and OD units of factor X. Point Q is the equilibrium of the producer.

At this point, the slope of the isoquants equal to the slope of the isocost line. The MRT of the two inputs equals their price ratio.

Thus we find that at point Q, the two conditions of producer’s, equilibrium in the choice of factor combinations, are satisfied.

(1) The isoquant (IP) is convex the origin.

(2) At point Q, the slope of the isoquant ?Y / ?X (MTYSxy) is equal to the slope of the isocost in Px / Py. The producer gets the optimum output at least cost factor combination.

When producing a good or service, how do suppliers determine the quantity of factors to hire? Below, we work through an example where a representative producer answers this question.
Let’s begin by making some assumptions. First, we shall assume that our producer chooses varying amounts of two factors, capital (K) and labor (L). Each factor was a price that does not vary with output. That is, the price of each unit of labor (w) and the price of each unit of capital (r) are assumed constant. We’ll further assume that w = $10 and r = $50. We can use this information to determine the producer’s total cost. We call the total cost equation an isocost line (it’s similar to a budget constraint).
The producer’s isocost line is:
10L + 50K = TC (1)
The producer’s production function is assumed to take the following form:
q = (KL)0.5 (2)
Our producer’s first step is to decide how much output to produce. Suppose that quantity is 1000 units of output. In order to produce those 1000 units of output, our producer must get a combination of L and K that makes (2) equal to 1000. Implicitly, this means that we must find a particular isoquant.
Set (2) equal to 1000 units of output, and solve for K. Doing so, we get the following equation for a specific isoquant (one of many possible isoquants):
K = 1,000,000/L (2a)
For any given value of L, (2a) gives us a corresponding value for K. Graphing these values, with K on the vertical axis and L on the horizontal axis, we obtain the blue line on the graph below. Each point on this curve is represented as a combination of K and L that yields an output level of 1000 units. Therefore, as we move along this isoquant output is constant (much like the fact that utility is constant as we move along an indifference curve).

How much K and L should the producer hire? The answer is that our choice must exist somewhere on this isoquant. If each possible choice must lie on this isoquant, then our basis for choosing one “best” combination should be to choose the least cost combination. Let’s experiment with some different possibilities, by plugging values for L and K into the isocost equation above. Each combination should yield output of 1000 units. Several combinations, and their specific total cost are given as follows:
L K TC
1,000 1,000 60,000
5,000 200 60,000
10,000 100 105,000
100 10,000 501,000
Now, the firm’s goal is to produce 1000 units at the lowest possible TC. The lowest total cost on the table is $60,000, so we can start there. There are two choices which yield this total cost. They are represented below as B1 and B2.

Is there a lower cost combination of L and K available? Yes, we can produce at a total cost of $52,500 by employing either 250 units of K and 4000 units of L, or 800 units of K and 1250 units of L. This appears on the graph below.

The second isocost, where TC = $52,500, rests below the former isocost, where TC = $60,000. If we continue to find lower and lower levels of total cost that provide us with 1000 units of output, then we will clearly reach lower and lower points on the isoquant. Eventually, we can find a level of total cost that involves a tangency between the isocost and isoquant. This is pictured below at point A.

In addition to being the lowest cost combination of L and K that produces 1000 units of output, pt. A involves a tangency point between the isoquant and isocost. That is, the slopes of these curves at pt. A are equal. The slope of the isocost is w/r, or –1/5. The slope of the isoquant is the ratio of the marginal products, MPL/MPK, which is given as the marginal rate of technical substitution (MRTS). Using calculus, it is possible to derive the MRTS as –K/L. Point A satisfies the condition that K/L = 1/5.
We can solve for K* and L* at pt. A, using (1), (2a) and the fact that, at pt. A, K/L = 1/5. First, substitute (2a) into (1) and the equation K/L = 1/5. We’re left with:
10L + 50(1,000,000/L) = TC
and
(1,000,000/L)/L = 1/5

Solve the second equation for L, substitute that result into the first equation to get the lowest value for TC (TC*).
TC* = $44,721.36

Once you have TC*, you can substitute this value into the isocost equation above (10L + 50,000,000/L = TC) and then solve for L* (rounded to the nearest whole number).
L* = 2,236

Going back to (1), we can substitute in L* and TC*, to get K*.
K* = 447

Q.5 Discuss the full cost pricing and marginal cost pricing method. Explain how the two methods differ from each other.
pricing – full cost plus pricing
Full cost plus pricing seeks to set a price that takes into account all relevant costs of production.? This could be calculated as follows:
Total budgeted factory cost + selling / distribution costs + other overheads + MARK UP ON COST
Budgeted sales volumes
An illustration of applying this method is set out below:
Consider a business with the following costs and volumes for a single product:
Fixed costs:
Factory production costs ?750,000
Research and development ?250,000
Fixed selling costs ?550,000
Administration and other overheads ?325,000
Total fixed costs ?1,625,000
Variable costs
Variable cost per unit ?8.00
Mark-Up
Mark-up % required 35%

Budgeted sale volumes (units) 500,000
What should the selling price be on a full cost plus basis?
The total costs of production can be calculated as follows:
Total fixed costs ?1,625,000
Total variable costs (?8.00 x 500,000 units) ?4,000,000
Total costs ?5,625,000
Mark up required on cost (?5,625,000 x 35%) ?1,968,750
Total costs (including mark up) ?7,593,750
Divided by budgeted production (500,000 units)
= Selling price per unit ?15.19
The advantages of using cost plus pricing are:
Easy to calculate??
– Price increases can be justified when costs rise
– Price stability may arise if competitors take the same approach (and if they have similar costs)
– Pricing decisions can be made at a relatively junior level in a business based on formulas

The main disadvantages of cost plus pricing are often considered to be:
This method ignores the concept of price elasticity of demand – it may be possible for the business to charge a higher (or lower) price to maximise profits depending on the responsiveness of customers to a change in price??
The business has less incentive to cut or control costs – if costs increase, then selling prices increase.? However, this might be making an “inefficient” business uncompetitive relative to competitor pricing;??
It requires an estimate and apportionment of business overheads.? For example, total factory overheads need to be calculated and then allocated in some way against individual products.? This allocation is always arbitrary.??
If applied strictly, a full cost plus pricing method may leave a business in a vicious circle.? For example, if budgeted costs are over-estimated, selling prices may be set too high.? This in turn may lead to lower demand (if the price is set above the level that customers will accept), higher costs (e.g. surplus stock) and lower profits.? When the pricing decision is made for the next year, the problem may be exacerbated and repeated.??
Amongst the factors that influence the choice of the mark-up percentage are as follows:
? Nature of the market – a mark-up should reflect the degree of competition in the market (what do the close competitors do?)
– Bulk discounts – should volume orders attract a lower mark-up than a single order?
Pricing strategy – e.g. skimming, penetration (see more on pricing strategies further below)??
– Stage of the product in its life cycle; products at the earlier stages of the life cycle may need a lower mark-up percentage to help establish demand.
pricing – variable or marginal cost pricing
With variable (or marginal cost) pricing, a price is set in relation to the variable costs of production (i.e. ignoring fixed costs and overheads).
The objective is to achieve a desired “contribution” towards fixed costs and profit.
Contribution per unit can be defined as: SELLING PRICE less VARIABLE COSTS
Total contribution can be calculated as follows:
Contribution per unit v Sales Volume
The resulting profit in a business is, therefore:
Total Contribution less Total Fixed Costs
The break even level of sales can be calculated using this information as follows:
Break even volume = Total Fixed Costs / Contribution per Unit
Consider a business with the following costs and volumes for a single product:
Fixed costs:
Factory production costs ?750,000
Research and development ?250,000
Fixed selling costs ?550,000
Administration and other overheads ?325,000
Total fixed costs ?1,625,000
Variable costs
Variable cost per unit ?8.00
Mark-Up
Mark-up % required 35%

Budgeted sale volumes (units) 500,000
Prices are set using variable costing by determining a target contribution per unit. This reflects:
• Variable costs per unit
• Total fixed costs
• The desired level of target profit (i.e. contribution less fixed costs)
The variable/marginal costing method can be illustrated using the same data used further above:
• Assume that the selling price per unit is £12
• Variable costs per unit are £8
• The contribution per unit is, therefore, £4 (£12 less £8)
What is the break even volume for the business?
• Total fixed costs are £1,625,000
• To achieve break-even, therefore, the business needs to sell at least 406,250 units (each of which produces a contribution of £4)
Looked at another way, what would be the required sales volume to generate a profit of £250,000?
• Total contribution required = total fixed costs + required profit
• Total contribution = £1,625,000 + £250,000 = £1,875,000
• Contribution per unit = £4
• Sales volume required therefore = 468,750 (£1,875,000 / £4)
The advantages of using a variable/marginal costing method for pricing include the following:
• Good for short-term decision-making;
• Avoids having to make an arbitrary allocation of fixed costs and overheads;
• Focuses the business on what is required to achieve break-even
However, there are some potential disadvantages of using this method:
• There is a risk that the price set will not recover total fixed costs in the long term. Ultimately businesses must price their products that reflects the total costs of the business;
• It may be difficult to raise prices if the contribution per unit is set too low

Marginal Cost Pricing
Marginal cost pricing is the practice of setting the price of a product at or slightly above the variable cost to produce it. This situation usually arises in one of two circumstances:

• A company has a small amount of remaining unused production capacity available that it wishes to use; or

• A company is unable to sell at a higher price
The first scenario is one in which a company is more likely to be financially healthy – it simply wishes to maximize its profitability with a few more unit sales. The second scenario is one of desperation, where a company can achieve sales by no other means. In either case, the sales are intended to be on an incremental basis; they are not intended to be a long-term pricing strategy.
The variable cost of a product is usually only the direct materials required to build it. Direct labor is rarely completely variable, since a minimum number of people are required to crew a production line, irrespective of the number of units produced.
The Marginal Cost Calculation
ABC International has designed a product that contains $5.00 of variable expenses and $3.50 of allocated overhead expenses. ABC has sold all possible units at its normal price point of $10.00, and still has residual production capacity available. A customer offers to buy 6,000 units at the company’s best price. To obtain the sale, the sales manager sets the price of $6.00, which will generate an incremental profit of $1.00 on each unit sold, or $6,000 in total. The sales manager ignores the allocated overhead of $3.50 per unit, since it is not a variable cost.
Advantages of Marginal Cost Pricing
The following are advantages to using the marginal cost pricing method:

• Adds profits. There will be customers who are extremely sensitive to prices. This group might not otherwise buy from a company unless it were willing to engage in marginal cost pricing. If so, a company can earn some incremental profits from these customers.

• Market entrance. If a company is willing to forego profits in the short term, it can use marginal cost pricing to gain entry into a market. However, it is more likely to acquire the more price-sensitive customers by doing so.

• Accessory sales. If customers are willing to buy product accessories or services at a robust margin, it may make sense to use marginal cost pricing to sell a product on an ongoing basis, and then earn profits from these later sales.

Disadvantages of Marginal Cost Pricing
The following are disadvantages of using the marginal cost pricing method:

• Long-term pricing. The method is completely unacceptable for long-term price setting, since it will result in prices that do not capture a company’s fixed expenses.

• Ignores market prices. Marginal cost pricing sets prices at their absolute minimum. Any company routinely using this methodology to determine its prices may be giving away an enormous amount of margin that it could have earned if it had instead set prices at or near the market rate.

• Customer loss. If a company routinely engages in marginal cost pricing and then attempts to raise its prices, it may find that it was selling to customers who are extremely sensitive to price changes, and who will abandon it at once.
Evaluation of Marginal Cost Pricing
This method is useful only in a specific situation where a company can earn additional profits from using up excess production capacity. It is not a method to be used for normal pricing activities since it sets a minimum price from which a company will earn only minimal (if any) profits. It is generally better to set prices based on market prices.

Q.6 Discuss the price output determination using profit maximization under perfect competition in the short run.
Output and price determination
Cost data:
• Assumption – a pure monopolist hires resources competitively and has the same technology as a purely competitive firm.

MR=MC rule: A monopolist seeking to maximize total profit will employ the same rationale as a profit-seeking firm in a competitive industry; they will produce at the point where MR = MC.
• Profit maximizing price: Find MC= MR and draw a vertical line up to the demand curve.
Draw a horizontal line. This is the price they set.?

No monopoly supply curve:
• No unique relationship between price and quantity supplied for a monopolist ? no supply curve
o Because the monopolist does not equate marginal cost to price, it is possible for different demand conditions to bring about different prices for the same output

Misconceptions concerning monopoly pricing:
• Not Highest Price:
o Misconception: Monopolists will charge highest price possible because they can manipulate output & price
o Monopolies still face consumer demand. If the price is too high, consumers won’t buy their products, and profits are decreased.
o Although there are many prices above Pm, monopolists don’t charge at those prices because they would yield a smaller-than-maximum total profit. (High prices would potentially reduce sales and total revenue too severely to offset any decrease in total cost)
o Monopolist seek maximum total profit, NOT the maximum price
• Total, Not Unit, Profit:
o Output level may not be at maximum per-unit profit, but additional sales make up for lower unit profit, which in turn maximizes total profit.

Possibility of losses by monopolist:
• Pure monopolist’s likelihood of earning economic profit greater than that of purely competitive firm’s
o PC – long-run – destined to earn only normal profit
o PM has high barriers of entry; therefore, the concept of “entry eliminates profits” does no apply to PM
• Pure monopoly does not guarantee profit:
•
o Monopoly is not immune from upward-shifting cost curves caused by escalating resource prices
o Monopoly is not immune from changes in tastes that reduce the demand for its product
o Both of these factors can lead to losses – initially it will persist in operating at a loss and to stop incurring loss, the firm’s owners will reallocate their resources

Establishing price and output in the short run under perfect competition

The previous diagram shows the short run equilibrium for perfect competition. In the short run, the twin forces of market demand and market supply determine the equilibrium “market-clearing” price for the industry. In the diagram below, a market price P1 is established and output Q1 is produced. This price is taken by each of the firms. The average revenue curve (AR) is their individual demand curve. Since the market price is constant for each unit sold, the AR curve also becomes the Marginal Revenue curve (MR).
For the firm, the profit maximising output is at Q2 where MC=MR. This output generates a total revenue (P1 x Q2). The total cost of producing this output can be calculated by multiplying the average cost of a unit of output (AC1) and the output produced. Since total revenue exceeds total cost, the firm in this example is making abnormal (economic) profits. This is not necessarily the case for all firms. It depends on their short run cost curves. Some firms may be experiencing sub-normal profits if average costs exceed the market price. For these firms, total costs will be greater than total revenue.

Short run losses

The adjustment to the long-run equilibrium
If most firms are making abnormal (or supernormal) profits, this encourages the entry of new firms into the industry, which if it happens will cause an outward shift in market supply forcing down the ruling market price.
The increase in supply will eventually reduce the market price until price = long run average cost. At this point, each firm in the industry is making normal profit. Other things remaining the same, there is no further incentive for movement of firms in and out of the industry and a long-run equilibrium has been established. This is shown in the next diagram.

We are assuming in the diagram above that there has been no shift in market demand, i.e. we are considering an outward shift in market supply brought about by the entry of new competing firms each of whom is supplying a homogeneous product to the market. The effect of increased supply is to force down the market price and cause an expansion along the market demand curve. But for each supplier, the price they “take” is now lower and it is this that drives down the level of profit made towards the normal profit equilibrium.
In an exam you may be asked to trace and analyse what might happen if
• There was a change in market demand (e.g. arising from changes in the relative prices of substitute products or complements)
• There was a cost-reducing innovation affecting all firms in the market or an external shock that increases the variable costs of all producers.
Effects of a change in market demand
We now consider how a competitive market adjusts to a change in market demand in both the short and the long run. In the short run, businesses are operating with at least one fixed factor. Therefore the elasticity of the supply curve depends on the amount of spare capacity, the level of existing stocks and also the time scale of the production process – in other words how fast and at what cost the industry can expand supply when demand changes.
In the long run, because of freedom of entry and exit into and out of the industry, we expect the market supply curve to be more elastic in response to a change in demand. The diagram below shows an outward shift of demand with short run market supply deemed to be relatively inelastic (in which case the short run adjustment in the market drives prices higher) but where long run market supply is elastic, putting downward pressure on price as market output increases.

Pure competition and economic efficiency
Perfect competition can be used as a yardstick to compare with other market structures because it displays high levels of economic efficiency.

1. Allocative efficiency: In both the short and long run in perfect competition we find that price is equal to marginal cost (P=MC) and thus allocative efficiency is achieved. At the ruling market price, consumer and producer surplus are maximised. No one can be made better off without making some other agent at least as worse off – i.e. the conditions are in place for a Pareto optimum allocation of resources.

2. Productive efficiency: Productive efficiency occurs when the equilibrium output is produced with average cost at a minimum. This is not achieved in the short run, but is attained in the long run equilibrium for a perfectly competitive market.

3. Dynamic efficiency: We assume that a perfectly competitive market produces homogeneous products – in other words, there is little scope for innovation designed purely to make products differentiated from each other and thereby allow a supplier to develop and then exploit a competitive advantage in the market to establish some monopoly power.
Some economists claim that perfect competition is not an optimal market structure for high levels of research and development spending and the resulting product and process innovations. Indeed it may be the case that monopolistic or oligopolistic markets are more effective in creating the environment for research and innovation to flourish. A cost-reducing innovation from one producer will, under the assumption of perfect information, be immediately and without cost transferred to all of the other suppliers.
That said, a “competitive market” (i.e. a contestable market) provides the discipline on firms to keep their costs under control, to seek to minimise wastage of scarce resources and to refrain from exploiting the consumer by setting high prices and enjoying high profit margins. In this sense, a more competitive market can stimulate improvements in both static and dynamic efficiency over time. It is certainly one of the main themes running through the recent toughening-up of UK and European competition policy as this introductory passage to a competition white paper demonstrates:
Gains from competition
Competitive markets provide the best means of ensuring that the economy’s resources are put to their best use by encouraging enterprise and efficiency, and widening choice. Where markets work well, they provide strong incentives for good performance – encouraging firms to improve productivity, to reduce prices and to innovate; whilst rewarding consumers with lower prices, higher quality, and wider choice. By encouraging efficiency, competition in the domestic market – whether between domestic firms alone or between those and overseas firms – also contributes to our international competitiveness.
Source: http://www.dti.gov.uk
The long run of perfect competition, therefore, exhibits optimal levels of economic efficiency. But for this to be achieved all of the conditions of perfect competition must hold – including in related markets. When the assumptions are dropped, we move into a world of imperfect competition with all of the potential that exists for various forms of market failure.

Comment from NehaTime December 25, 2011 at 1:55 am

Q.1 What are the functions that HR attempts to fulfill in any organization.Answer:
The variety of human relations problems leads to the conclusion that no oneprogram or single approach can create conditions fro good human relations. Therefore, it is common for organizations and individuals in an organization toconstantly innovate and resolve challenges that will benefit both the organization aswell as the employee. The Functions that HR attempts to fulfill in any organizationare as follows:

1. Human Resource Planning
Estimating the need for resources in order achieve the desired business results. HRplans can be both short term/immediate as well as long term/strategic. The HRteam partners with the line managers to understand the business goals and targetsfor the year and together plan the HR needs in order to meet the goals.

2. Acquisition of Human Resources
Staffing the organization with the right mix of skills and competencies at the righttime. It also includes HR initiatives like promotions and internal job posting to fulfillthis requirement for human resources. Staffing teams in organization are usuallyseparate group of specialists who work closely with the line managers tounderstand the skills and competencies needed for the job and engage together toelect the best talent for the open position.

3. Training and employee development
Focuses in managing training activities to upgrade skills and knowledge as well assoft skills like the ream building and leadership. The training team is again a groupof HR specialist who proposes the training program and consults with the linemanagers to ensure that the program achieves the desired outcomes.

4. Building performance management systems
Focuses on the right processes to set goals for performance as individual / teamsand related measurement methods. This is core HR activity and is supported by theHr generalist.

5. Rewards systems
Establishing appropriate compensation systems and reward mechanism that wouldreward the desired outcome and results in accordance with the cooperate values. The again forms a part of HR generalist’s tasks. Hoe employees progress in aorganization how they are paid w.r.t internal and external market factors, whatemployee benefits are offered are some aspects that this function redresses.

6. Human resources information systems
Taking care of operational transactions form the time an employee exits, likepersonal files, compensation administration, payroll, benefits administration andissuing letters and testimonials. That task is supported by as separate HR operation team who acts as an Hr helpdesk and provides information to theemployee/managers.

Q.2 Discuss the cultural dimensions of Indian Work force.Answer:
Cultural Dimension of Indian Work Force:
The foundation for understanding theunique work practices at a country level can be best is understood by firstunderstanding the culture aspects of the country¶s workforce. The pioneering workdone by Dutch Scientist, Geert Hofstede is a useful tool in understanding thecultural differences used to differentiate countries. He identified five culturaldimensions around which counties have been clustered. The dimensions are: power distance, uncertainly avoidance, individualism,masculinity and long term orientation. Geert Hofstede dimension are based onresearch conducted among over 1000 IBM employees working globally. While theircontinued to be other studies like the GLOBE (Global leadership and organizationalbehavior Effectiveness) project and trompenaar’s framework, hofstede’s model ismost popular.

Power Distance
Power distance is the extent to which less powerful members of institutions andorganizations accept that power is distributed unequally. Countries in which peopleblindly obey of superior have high power distance.High power distance countries have norms, values and beliefs that support
•
In equally is good; everyone has a place; some are high, some are low

•
Most people should be dependent on a leader,
•
The powerful are entitled to privileges, and
•
The powerful should yield the powerIndia score 77 on power distance , indicating high power distance as a result of theinequalities both at the level of society as well as the at the workplace. Indianorganization typically have hierarchical structures, policies yield power andsubordination is acceptable. The dimension of high power distance at the workplacecan be best understood as:
•
People dislike work and try to avoid it.
•
Managers believe that they must adopt theory X leadership style, that is,they must be authoritarian, and force workers to perform and need tosupervise their subordinated closely.
•
Organizational structure and systems tend to match the assumptionregarding leadership and motivation.
•
Decision making is centralized.
•
Those at the top make most of the decision. Organization tends to have tallstructures.
•
They will have a large proportion of supervisory personal and The people atthe lower level often will have low job qualifications.
•
Such structure s encourages and promotes inequality between people atdifferent levels.

Uncertainty Avoidance
Uncertainty avoidance is the extent to which people feel threatened by ambiguoussituation, and have created beliefs and institutions that try to avoid these Indiascores 40 indicating low to average uncertainly avoidance characterizes. Countrieswith low to average uncertainly avoidance have people who are more willing toaccept that risks are associated with the unknown, and that life must go on in spiteof this specifically, high uncertainly avoidance countries are characterized bynorms, values and beliefs which accept that

•
Conflict should not be avoided,
•
Deviant people and ideas should be tolerated ,
•
Laws are not very important and need not necessarily be followed,
•
Experts and authorities are not always correct and consensus is notimportant.Low uncertainty avoidance society such as ours have organization setting with lessstructuring of activities, fewer written rules, more risk ± taking by managers, higherlabor turnover and more ambitious employees. Such an organization encouragesemployees to use their initiative and assume responsibility for their actions.Denmark and Great Britain are good examples of low uncertainty avoidancecultures. Germany, Japan and Spain typify high uncertainty avoidance societies.

Individualism
Individualism is the tendency of people to look after themselves and their familyonly. The opposite of this collectivism which refers to the tendency of people tobelong to group and to look after other in exchange for loyalty India score 48 onindividualism, indicating somewhat low scores, therefore tending towards a morecollectivistic society.Collectivist countries believe that:
•
One’s identity is based on one’s group membership,
•
Group decision making is best, and
•
Group protects individuals in exchange for their loyalty to the group.Organizations are collectivist societies tend to promote nepotism in selectingmanagers. In contrast, in individualism societies, favoritism shown to friends andrelatives is considered to be unfair and even illegal. Further organizations incollectivist culture base promotions mostly on seniority and age, where as inindividualist societies; they are based on one’s performance. Finally in collectivistcultures, important decisions are made by older and senior managers as opposed toindividualist cultures, where decision making is an individual’s responsibility.

Q.3 Explain the need for Human Resource planning system.Answer:
Human resource planning system is a mandatory part of every organization’sannual planning process. Every organization that plans for its business goals for theyear also plan how it will go about achieving them, and therein the planning for thehuman resources:
1.To carry on its work, each organization needs competent staff with thenecessary qualification, skills, knowledge, work experience and aptitude of work.

2.Since employees exit and organization both naturally (as a result of superannuation) and unnaturally (as a result of resignation), there is an on-going need for hiring replacement staff to augment employee exit. Otherwisework would be impacted.

3.In order to meet for the more employees due to organizational growth andexpansion, this is turn call for large quantities of the same goods and servicesas well as new goods. This growth could be rapid or gradual depending on thenature of the business, its competitors, its position in the market and thegeneral economy.

4.Often organization might need to replace the nature of the present workforceas a result of its changing needs, therefore the need to hire new set of employees. To meet the challenges of the changed needs of

technology/product/service innovation the existing employees need to betrained or new skills sets induced into the organization.

5.Manpower planning is also needed in order to identify an organizations needto reduce its workforce. In situation where the organization is faced withsevere revenue and growth limitation it might need to plan well to managehow it will workforce. Options such as redeployment and outplacement canbe planned for and executed properly.

Q.4 Elucidate the classification of wages in the Indian System.Answer:
In India wages system is classified as follows:1.Minimum wages2.Fair wages3.Living wages

1. Minimum wages
A minimum wages has been defined by the committee as “the wages which mustprovide not only for the bare substance of life, but for the preservation of theefficacy of the worker. For this purpose minimum wages must provide for somemeasure of education, medical requirement and amenities”. In other words,minimum wages should provide for sustenance for the worker’s family, for hisefficiency, for the education of his family members, for their medical care, for theiramenities. It is very difficult to determine the minimum wages because conditionvaries from place to place, industry to industry and from worker to worker.However, the principles for determining minimum wages were evolved by thegovernment and have been incorporated in the minimum wages act,1948, the

important principles being that minimum wages should provide not only for the baresustenance of life but also for the preservation of the efficiency of the workers bythe way of education, medical care and other amenities.

2. Fair wage
It is the wage which is above the minimum wage but below the living wage. Thelower limit of the fair is obviously the minimum wage; the upper limit is set by thecapacity of industry to pay. Between these two limits, the actual wages shoulddepend on consideration of such factor as:

i)The productivity of labour;

ii)The prevailing rates of wages in the same or neighboring localities;

iii)The level of the national income and its distribution; and

iv)The place of industry in the economy.

3. Living wages
One which should enable the earner to provide for himself and his family not onlythere bare essentials of food, clothing and shelter but a measure of frugal comfort,including education for his children, protection against ill-health, requirement of essential social needs and a measure of insurance against the more importantmisfortunes including old age´ in other words, a living wage was to provide for astandard of living that would ensure good health for the worker and his family aswell as a measure of decency, comfort, education for his children and protectionagainst misfortunate. Generally ascertaining wages and deciding who to pay what isa activity undertaken in the beginning when a organization is set up. There on it areannual reviews to make correction per the country’s economic and market/industrytrends. The management considers the state of the labor market and takes intoaccount of what he can afford to pay and the value of the worker to him. Theworker¶s willingness for employment at the rate offered implies that they agree towork at that rate; through they have had no part in fixing it.
1.
Collective bargaining:
It is still in the initial stage in India. Although it is adesirable development in the relation between management and labor, itcannot be imposed upon either side by compulsion and should evaluatenaturally from within.

2.
Voluntary arbitration
: In voluntary arbitration, both parties agree to refertheir dispute agreed arbitrator and his award becomes binding on the parties

3.
Wage Legislation
: Wages are fixed according to the law in some industries. The central government and state government may fix minimum wagesunder the minimum wages act 1948 for the industries in which workers areexploited or too unorganized to protect their own interest. In order to advisethem in the matter of fixing minimum wages, the government appointsminimum wages committees and the advisory boards. The committees andthe advisory boards consist of equal number of workers and employersrepresentative and also independent members whose number should notexceed one- third of the total number of members.

4.
Conciliation:
The industrial dispute act 1947, provide for consideration in caseof dispute between employee and worker. If an agreement is reached in thecourse of conciliation proceeding, it becomes binding on the parties andtakes effects from the date agreed upon or from the date on which it issigned by the two parties. In case no agreement is reached, the conciliationofficer sends a full report o the proceeding. On the receipt of the report, thegovt. may decide to refer the case to industrial tribunal for award.
5.
Adjudication:
Labor courts and industrial tribunal are set up under theindustrial disputes act 1947. On studying the awards one gets the impressionthat the adjudication are attempting to justify their decision in social andethical terms. At the same time, there is desire to satisfy both parties todispute, and therefore. Economics factors such as capacity to pay,unemployment, profit, condition of the economy or welfare of the industryconcerned, are given due prominence.

6.
Wages Board:
The board is appointed by govt. and consists of sevenmembers- two management, two of labour, two independent and a chairman. The board is expected to take into account the needs of the specific industryin a developing economy, the special feature of industry, the requirement of social justice and the necessity for adjusting wage differential in such amanner as to provide incentives to workers for advancing their skill. Itsrecommendation may be accepted by the govt. either completely or partlyand may be statutorily imposed on the industry in question, or may berejected

Q.5 Ms. S. Sharma is the General Manager HR of a private educational group. She is planning for the promotion policy for the faculty members.The norms are also ruled by the government policy and criteria. Moreover the options to promote are limited. Suggest Ms Sharma the alternative way to vertical promotion. What are the challenges in implementing that option?Answer:

Individually perceived sequences of a attitude and behavior work related activities and experience over the span of a person’s life. In normal parlance the term career has both an internal and external focus. An internal focus refers to the way anindividual views his/her career and the external or objective focus and refers to the series of job position held by the individual. The dynamics of career development inan organizational context has two dimensions:
•
How individuals plan and implement their own career goals , and
•
How organizations design and implement their career implement their career development programs.Career planning is a deliberate attempt by an individual to become more aware of their skills, interest, values, opportunities and constraints. It requires an individualthinking to identify career-related goals and establishing plans towards achievingthose goals. Often it is self driven process, which every professional appends sometime to dwell on and discuss it with peers or superiors and frame it. It is also viewedfrom time to time that the individual looks for possible new carrier option. Having acareer plan builds a commitment towards achieving it and is viewed as an excellentpersonal goal setting exercise for self motivation.Career management is considered to be an organizational process that involvespreparing, implementing & monitoring career plans undertaken by n individualalone or within the organizational career system. Organizational establishing policesthat provide for multiple career path options that an employee can choose from andpursue. This is supported with a lot of training and development activities that are

agreed to with the managers and planned carefully and executed. A variety of career development activities and tools exists for use in organizations. HRmanagers should be familiar with these components bemuse the managers oftenserve as internal consultants responsible for designing the career development system. Some of the activities described are individuals career planning tools andother are commonly used for organizational career management.In general the most effective career development program will use both type of activities Career development program are as follows:

1.
Self assessment tools:
these are usually technology enabled on line tools that form part of the performance appraisal system and allow the individual to identify areas of strength the best e.g career planning workbooks, career workshop etc

2.
Individual counseling:
formally the process allows for individuals to discuss this as part of the performance management process with their immediate managers and share and take feedback with their immediate managers and share and take feedback on the appropriateness of the choices and how to go about pursuing it. Often managers recommend relevant other managers andleaders who the employee can link with to seek advice and support.Organizations also provide for formal ‘mentoring programs´ to which anemployee can enroll and sign up a mentor who can then provide the supportand counseling on the best career option and how to go about it achieving it.

3.
Information services:
organization has establishing policies on what skills and experience that each job in the organization requires. Jobs with similar skills and experience are clubbed together to create parallel career paths. These are typically called career ladders or career paths and they help an employee to identify what his options are for future growth and identify the appropriate one based on his personal skills and capabilities/limitation. These career pathwould be supplemented with additional information on skills and experiencethat one must have for each role/job in there career path. It would alsospecify the particular qualification or special certification that the positiondemands. An employee aspiring to purpose a career option would need todedicate time and efforts and the expenses towards acquiring the same.Large MNC’s also encourage the reimbursement of these expenses as an

annual fixed amount on successfully the exam / certification. The employeehowever needs to find the time and expend the efforts away from work. Theactual move of the employee to the new role would however depend on theexistence of the job vacancy in the role. Employee can also approach careerresource / talent management centers supported by HR team for moreinformation on how to plan careers and apply for new roles and job.

4.
Initial employment programmed
organization also run internship andapprenticeship programs wherein the individual aspiring to do particular jobscan spend some time as a temporary employee to explore interest and skill fitment for the job/role.

5.
Organization assessment program:
it can proactively establish formal process wherein an employee can volunteer to participate and understandhimself/herself and his/her strengths. Through the use of assessment center organizations can help an employee identify areas for improvement andmeans of building those skills. So he can achieve his career plans. Certainorganizations offer psychological testing instrument which profile theemployee’s strengths and roles and responsibility he/she will best fit into.

6.
Development programs
focus the efforts of the employee towards helping the employee to achieve his career goals. The assessment centers, job rotations program, in housing training, tuition refund plans, all prove effective tools to help the individual along.

Q.6 ABC is an organization that wants to revise the HR policies. Before doing that it wants to have some details about the following:
•
What the employees think about the company?
•
What do they think, in the company is going well?
•
What practices in the company they think are not doing well?
•
Get the feedback on managerial effectiveness.Suggest the suitable method to collect the employee opinion and explainthe method.

Answer:
Employee survey techniques have developed significantly over the past few years,with web based technologies it is easier and cheaper than ever to collect andmanage data. In the past, any HR driven initiative was seen as tactical and of littlereal benefit to the organization as a whole. Now many enlightened organizationssee HR and employee surveys as a powerful business improvement tool.Customers now have a greater range of choices than ever and are becomingincreasingly better informed. This in turn means that many have very highexpectations and, if they feel they are being ‘short changed´ in any way, they takethe initiative and switch their allegiance. This reduction in consumer loyalty cancreate difficulties in retaining existing customers, causing organizations to increasethe amount they spend on engaging new customers.Consumer choice has also brought greater competitiveness to the market and inmany situations it is difficult for an organization to differentiate itself from thecompetition in terms of production range, quality and price. As a result, the maindifferentiator for organizations has to be the quality of service that the customerreceives. It is vital for every interaction to be a positive one, not just for thecustomer, but for the employee as well. If the customer is happy, they spend moremoney, which naturally improves the organization’s overall business performance.

Defining Employee Survey Goals and Objectives
Before starting on a staff survey process, it is vital to define a set of objectives for the survey. Without these objectives, the survey program will lack focus and it will be difficult to raise enthusiasm for the survey among your key influencers anddecision makers. All employee survey programs need to be seen as a company-wide initiative that is driven by managers and employees from across the wholeorganization and not something that is solely initiated and managed just within HR

Deciding on the Appropriate Survey Methodology
Defining objectives at the outset will help to determine the methodology because,to meet the desired objectives, you will need to consider the following:
•
Are all employees affected and should all employees need to be involved?
•
Will changes and improvement action be required at different levels acrossthe organization?
•
How will managers and employees be engaged in the improvement process?
•
How will awareness of the survey, its results and improvements be raised andmanaged among employees?
•
How will the progress of improvement actions be reviewed, monitored andcommunicated over time?Quantitative and qualitative research methods can both be highly effective inemployee surveys. It is essential, though, to ensure that the correct methodology isused for the type of survey being conducted.Employee satisfaction surveys are the most common form of quantitative research. There are occasions when both methodologies can be effectively combined. Forexample, in an employee satisfaction survey, you may decide to use focus groupsbefore designing the survey in order to determine the survey content and/or pilotquestionnaire.Employee Satisfaction Surveys It is worthwhile examining employee satisfactionsurveys in more detail given that they are the most popular type of employeesurvey.
•
Pre Survey
•
During the Survey
•
Post Survey
•
Between Surveys

AN INTRODUCTION TO EMPLOYEE SURVEY TECHNIQUES
Planning for Employee Satisfaction Surveys
The following outlines some of the factors that should be communicated at eachstage of the process:
Pre Survey
•
Objectives of the survey, rationale for the survey and how the results will be fed back
•
Use an independent, third-party agency for data collection and analysis
•
Timing of the data collection
•
Senior management commitment to the survey
•
Importance of getting a good response rate so that all employee opinions areheard
•
Importance of participation
•
Methodology to be used
•
Assurance that the study will protect anonymity and preserve confidentiality
During the Survey
•
Reminder of the objectives and assurance that action will be taken
•
Assurance that individual surveys cannot be seen
•
Regular reminders and a notice of when the survey completion period willend
•
How the results will be acted upon
•
Update on current response rate
•
Reinforce the importance of participation
•
How employees can participate and what employees should do if havingproblems accessing or completing the survey
•
Reinforce anonymity and confidentiality of the results
Post Survey
•
Thank employees for participating and communicate how results will beshared
•
Final response rate (Company wide vs. Business Units/Divisions)
•
Detail on how employees should get involved in the improvement actionplanning process

•
Local results and local improvement action planning
•
Provide top-level summary results
•
Reminder of the action planning processBetween Surveys
•
Highlight and recognize successful examples of action planning and progressmade
•
Recognize the contributions of teams and individuals to the action planningprocess
•
Senior management endorsement and support of the final action plan/surveyoutcomes
•
Detailed plans for the next survey
•
Highlight any areas where action cannot be taken and the reasons for this
•
Highlight the impact of action planning on customer service and businessperformance

Electronic and Web-Enabled
Increasingly, organizations are starting to move towards electronic methods of surveying their employees and the most common method is hosting a web-enabledsurvey.

Questionnaire Design
The design of the questionnaire is important as it can have as much influence overthe response rate as the method of completion.

The key incentive
In contrast to the weak influence of incentives, research shows that employees aremore likely to participate in an employee survey if they believe that the results willbe acted upon. The golden rule of this type of survey is that, if you do not intend toact on the results, then do not conduct the survey in the first place.

Results Analysis and Reporting
There are many different ways of analyzing, cutting and reporting results and eachorganization has to decide individually on the best method for their needs

IMPROVEMENT ACTION PLANNING
Background As noted earlier, the guiding principle of employee survey is that, if youare not prepared to act on the results, then do not conduct the survey in the firstplace. You have spent time and effort getting employees enthusiastic about thesurvey and they now have high expectations that there will be improvement activityin which they will be involved.Improvement action planning should be ³top down´ process where the priorities forthe organization are identified, communicated and acted upon at the seniormanagement level. Then moving down to Divisional and Unit levels, local teamsshould identify and tackle the things that they have direct control over and escalateanything else back upwards.Prioritizing Improvement Actions Prioritization of improvement actions should betaken under consideration. Some organizations struggle with improvement actionplanning because they try to tackle far too many improvement actions at once andstart spreading the valuable resources they have too thinly over too many actions.Our recommendation is that not more than three to four improvement actionsshould be tackled at one time and that further actions should not be pursued untilat least one of the existing actions has been fully completed. The specific components of the plan should be as follows:1.

Area for improvement:
What is the problem? What impact is it having onemployees and customers? What is causing the problem?

2.
What Needs to Happen:
Specify the specific improvement action that isrequired to address the problem.

3.
How It Will Happen:
Specify the process and activities required as part of the improvement action.

4.
Timelines:
It is important to have a target date for completing the deliveryof the action. This sets the focus that any target delivery date is realistic andachievable and it may be stretched if not met

.5.
Action Owner:
It is important for one person to be allocated ownership forthe action. This does not necessarily mean that this person is solelyresponsible for
the delivery of the action, but they are responsible forensuring that the delivery does actually happen. Ownership for actionsshould be spread around the team so that no one person is overburdened.

6.
Resources:
Specify and determine what individual resources are requiredsuch as personnel, money, materials or support from other parts of theorganization

7.
Improvement Targets:
It is important to be able to determine whetherimprovement actions are having the desired effect by setting improvementtargets. The survey can be used as a source for this by pulling outappropriate questions and setting targets for improving the results to thesequestions in the next survey.

8.
Method of Measurement:
List the data sources that will provide theinformation needed for improvement targets.

9.
Review Dates:
Specify all of the dates when the improvement action will bereviewed.

10.
Review of Progress:
This step should be completed after each review tooutline the progress made against the action.

11.
Completion Date:
The date when the action was finally completed.

12.
Impact:
Completed after the action has finally been delivered to define theimpact and difference that the improvement action has made to employees,customers and the business overall.

Reviewing the Action Plan
Regular review of the action plan is perhaps the most important element of theimprovement action planning process because it ensures that the momentum isbeing maintained, enables progress to be tracked and identifies any barriers thatmay exist